Google may pull out of China after a series of determined cyber-attacks and concerns about censorship, but its departure may not be enough to allow Microsoft's Bing search engine, currently with single-digit market share in mainland China, to fill the vacuum. Despite Microsoft's public assertions that China represents its most important strategic search market, local-grown search engines such as Baidu would likely continue to dominate even in Google's absence.
Microsoft has made public its desire to seize a bigger portion of the
mainland Chinese market for its search engine, Bing, but it remains too early
to tell whether Google's threat to pull out of China
will help or hurt its chances.
"Microsoft is committed to the China
market and the search market in China
is the most important strategic market for Microsoft," Microsoft
told Reuters on Dec. 29.
"We specifically set the search technology
center in China
to get a deeper understanding of what Chinese users need, to be able to deliver
the best product to them."
As quoted by Reuters in that article, research company Analysys
International estimated that Chinese search engine Baidu held 63.9 percent of
the mainland market, followed by Google with 31.1 percent. Although other
search engine monitors, including ComScore, have pegged Bing's Chinese market
share as strictly in the single digits, an Analysys analyst said the site had
experienced 30 percent growth in higher-volume visitors.
That was before Jan. 12, when Google Chief Legal Officer David Drummond in a
post on the official blog said the company would
no longer censor results on Google.cn,
and would be launching discussions
with the Chinese government about whether the Google could operate "an
unfiltered search engine" within local laws. If an acceptable agreement
cannot be reached, Google has threatened to shut down its operations in China.
Google's decision apparently took into account what Drummond described as a "highly
sophisticated and targeted attack" on the company's cyber-infrastructure
that originated from within China
and that is thought to have attempted to access the Gmail accounts of Chinese
human rights activists.
In a Jan. 13 research note, Piper Jaffray analyst Gene Munster offered a 35
percent chance that Google would cease its operations in China.
He estimated Google's share of the mainland search market at 30 percent, while
Baidu held a 65 percent share.
Google's earnings from China,
as a percentage of its gross revenues, currently total between 1.1 and 2
percent, depending on the third-party company doing the estimating. Despite
that relatively small number, the expectation among analysts is that China's
fast-growing market would provide Google with increased revenue as time went
on; pulling out of the market, therefore, has the potential to affect the company's
long-term bottom line.
Meanwhile, Microsoft has run into its own difficulties with the Chinese
version of Bing. In a Nov. 20 column, New York Times columnist Nicholas Kristof
accused the company of "craven kowtowing" to the Chinese government
by offering "sanitized pro-Communist results" for politically
sensitive search terms such as "Dalai Lama" entered into Bing in
"What's most offensive," Kristof wrote at the time, "is that
this is true wherever in the world the search is conducted-including my office
here in New York."
That same day, Microsoft promised in a blog post to fix the issue.
"Today's investigations uncovered the fact that our image search is not
functioning properly for queries entered using Simplified Chinese characters
outside of the PRC (People's Republic of
China)," wrote Bing Senior Director Adam Sohn. "We have identified
the bug and are at work on the fix. We expect to have this done before the
Sohn defended Bing at the time as producing "very balanced Web
results" for simplified-Chinese queries such as "June 4th
Tiananmen," but also suggested that "we can continue to improve our
relevancy and comprehensiveness in these Web results and we will." A week
later, on Dec. 1, eWEEK conducted its own independent
testing of Bing, the results of which can be found here.
If Google pulls out of China,
Microsoft with its comparatively small market share could have a hard time
gaining against dominant local search engines such as Baidu; however, with its
largest U.S.-based competitor removed from the arena, the prospects for long-term
revenue growth certainly appear brighter, at least at first glance.
When contacted to see whether Microsoft had any opinion on the latest
Google-China developments, a company spokesperson said, "We have no indication
that any of our mail properties have been compromised." The spokesperson
refused any further comment when pressed about how Google pulling out of China
might affect Bing's prospects.