Opinion

Google exit good for small players

By Li Zhi (China Daily)
Updated: 2010-02-05 11:44

Google's threats to pull out of China have created much controversy recently, with many industry watchers believing its departure would allow Baidu, its key domestic rival, to dominate the world's largest online market.

However, under further examination, Baidu may not be the actual beneficiary of Google's exit, but rather smaller search engines, e-commerce firms and even the government will see new opportunities to fill the void.

Since Google established its China office in 2005, it has become one of the most successful players in the country's search engine market. Its domestic revenue hit 2.27 billion yuan ($332.50 million) last year, and it boasted a 31.8 percent market share.

Considering the fact that Baidu and Google China control over 90 percent of China's search engine market, it is more likely that Baidu will dominate the industry in the short term, if Google pulls out.

However, in the long term, growing concern over a potential monopoly by Baidu may actually provide more opportunities for smaller search engines like Sougou and Sousou. Chinese e-ecommerce companies such as Alibaba, DHGate and domestically affiliated networks like Yiqifa.com and Chanet will also have great opportunities to enter the vacancy Google would create.

In other words, former rivals would not only gobble up Google's market share, new market entries from outside the search engine market would also be well positioned to get a piece of the pie.

In addition, concerns over Baidu's possible market domination would also spark tougher regulations from the government. It is also possible that the Chinese authorities may launch their own version of a search engine, just like they did in the online video market.

These possible outcomes, though, may serve to better regulate the market, but inevitably slow the development of China's search engine market as a whole.

However, we have to admit that Google has disadvantages. For example, when compared with Baidu, the US search engine still has a lower recognition rate in China, especially outside bigger cities. The company also does not have a very good relationship with the government.

Even if Google finally decides to stay on, I think its business in China will inevitably suffer from the controversy.

The author is an analyst from domestic IT research firm Analysys International.