Google Woos Partners for Potential China Expansion
Google Woos Partners for Potential China Expansion
While its search engine and Gmail remain blocked, the tech giant provides tools to app developers, manufacturers and advertisers in the region
Google has more than 700 employees across China in offices in Beijing, Shanghai and Shenzhen.
By Douglas MacMillan in San Francisco, Shan Li in Beijing and Liza Lin in Shanghai Updated Aug. 12, 2018 12:16 p.m. ET
Google’s search engine is blocked in China. But inside the Beijing offices of smartwatch maker Mobvoi Inc., the internet giant looms large.
Mobvoi relies on Google’s software to power its line of watches and smart speakers. Its engineers build apps using TensorFlow, Google’s free set of development tools for artificial intelligence. Mobvoi’s sales team targets users outside of mainland China by buying Google ads.
“It’s not just software, it’s an ecosystem,” Zhifei Li, Mobvoi’s chief executive, said of Google—also a minority investor in his startup.
Mr. Li is one of many allies Google has courted in recent years as it tries to keep a foothold in China, a market from which the Alphabet Inc unit retreated eight years ago in protest over government hacking and censorship. While its core services like search, Gmail and YouTube remain blocked for most Chinese citizens, the company provides tools and support to a growing number of app developers, manufacturers and advertisers in the region, who rely on Google to reach global customers.
Now those allies will likely be crucial as Google embarks on a broader China expansion strategy, according to a number of people either involved in the effort or watching it closely. As part of a project dubbed “Dragonfly,” Google is testing a mobile version of its search engine that would adhere to China’s strict censors, people familiar with the matter said. To convince the Chinese government to allow such a move, Google can point to its local partners as examples of how the company contributes to economic growth. That is in contrast to rival Facebook Inc., which also covets the China market but has had less success establishing a beachhead.
By working with local players, Google is building the case that it is boosting the country’s economy. “Chinese authorities want to support domestic champions as much as possible,” said Mark Natkin, managing director at Beijing-based industry researcher Marbridge Consulting.
Google’s existing relationships could also provide customers-in-waiting for additional services it sells, like cloud hosting and business apps.
Launching a search engine is far from certain and hinges on the approval of China’s authorities, who frequently wield their power to block American tech giants from entering the market and competing with homegrown rivals. The plan also faces certain backlash from critics back home; six U.S. senators in a letter have called the effort “deeply troubling” and said it risks “making Google complicit in human rights abuses related to China’s rigorous censorship regime.” Google has declined to comment on the letter from senators.
...and growing faster than other regionscombined.
Source: S&P Capital IQ
In his three years as Google’s chief executive, Sundar Pichai has been a frequent visitor to the region, meeting with top Chinese officials and encouraging businesses to use Google’s free open-source tools like TensorFlow and Android—the mobile operating system which powers three-quarters of all Chinese smartphones.
Google’s investments in China this year have included $550 million for a 1% stake in local online retailer JD.com , along with investments in Chushou, a live video-streaming site, and Manbang Group, a truck-hailing company.
Google has held talks for more than a year with local partners, including Tencent Holdings Ltd. , about offering cloud-hosting services in China, said a person who was briefed on those talks. Under the scenarios that have been proposed, Google would sell software and hosting services that would run on a data center owned by a local company, the person said. The status of the talks, which were earlier reported by Bloomberg, is unclear.
A spokesman for Google declined to comment on the company’s talks with Chinese partners. Tencent didn’t respond to requests for comment.
During an appearance at the Chinese government’s annual cyberspace conference last December, Mr. Pichai said open-source software platforms like Android are helping to spur innovation from companies like Chinese phone maker Xiaomi Corp.
“That’s part of our goal when we develop these open-sourced platforms,” Mr. Pichai said. “Anyone and everyone can take it and develop things at scale.”
Google executives in China often point out that the company never actually left the country. It has more than 700 employees—roughly split between salespeople and engineers—across offices in Beijing, Shanghai and Shenzhen. That’s up from about 500 since 2015, the year Mr. Pichai became CEO. Late last year, it opened an artificial intelligence research lab in Beijing.
Xiaomi and other Chinese phone makers don’t pay Google to sell Android-based phones to customers in China. But they increasingly rely on Google services to help sell their phones to customers outside of China. Chinese manufacturers sell about 450 million phones to customers abroad every year that are preinstalled with Google’s standard suite of mobile apps, such as search, maps and email, according to Counterpoint Research.
By showing mobile ads and taking a cut of app-store sales on these devices, Google may generate up to $10 billion annually on phones made by Chinese partners, Counterpoint estimates.
With no search engine, Google has fewer opportunities to show ads to Chinese users and lags far behind Chinese internet giants Alibaba Group Holding Ltd. and Tencent in the sale of ads shown within the country. But as more Chinese businesses use advertising to reach customers around the world, they are buying ads on Google and Facebook.
Google doesn’t break out results from its China business specifically, but reported sales of $5.1 billion in its Asia Pacific region for the three months ended June 30. That amount grew 36% from the same period a year earlier, compared with 26% growth in Google’s total revenue over the same period.
Google ads have become essential for Chinese businesses like Yamibuy.com, an e-commerce store that sells most of its goods to customers outside the mainland, said Hans Tung, a partner at GGV Capital and investor in the startup.
Neo Niu, the founder of Chinese marketing company GrowthHash, said he relies on Gmail, Google Docs and Google Drive as his primary way of communicating with clients, half of which are outside of China. He pays for the business version of Google’s apps and accesses them through a virtual private network to skirt China’s censors.
It would be impossible to replace those tools with ones available in China, Mr. Niu said. “You have to put yourself in a client’s shoes—you have to use what they use.”
—Yang Jie in Beijing contributed to this article.
https://www.wsj.com/articles/google-woos-partners-for-potential-china-expansion-1534071600
While its search engine and Gmail remain blocked, the tech giant provides tools to app developers, manufacturers and advertisers in the region
Google has more than 700 employees across China in offices in Beijing, Shanghai and Shenzhen.
By Douglas MacMillan in San Francisco, Shan Li in Beijing and Liza Lin in Shanghai Updated Aug. 12, 2018 12:16 p.m. ET
Google’s search engine is blocked in China. But inside the Beijing offices of smartwatch maker Mobvoi Inc., the internet giant looms large.
Mobvoi relies on Google’s software to power its line of watches and smart speakers. Its engineers build apps using TensorFlow, Google’s free set of development tools for artificial intelligence. Mobvoi’s sales team targets users outside of mainland China by buying Google ads.
“It’s not just software, it’s an ecosystem,” Zhifei Li, Mobvoi’s chief executive, said of Google—also a minority investor in his startup.
Mr. Li is one of many allies Google has courted in recent years as it tries to keep a foothold in China, a market from which the Alphabet Inc unit retreated eight years ago in protest over government hacking and censorship. While its core services like search, Gmail and YouTube remain blocked for most Chinese citizens, the company provides tools and support to a growing number of app developers, manufacturers and advertisers in the region, who rely on Google to reach global customers.
Now those allies will likely be crucial as Google embarks on a broader China expansion strategy, according to a number of people either involved in the effort or watching it closely. As part of a project dubbed “Dragonfly,” Google is testing a mobile version of its search engine that would adhere to China’s strict censors, people familiar with the matter said. To convince the Chinese government to allow such a move, Google can point to its local partners as examples of how the company contributes to economic growth. That is in contrast to rival Facebook Inc., which also covets the China market but has had less success establishing a beachhead.
By working with local players, Google is building the case that it is boosting the country’s economy. “Chinese authorities want to support domestic champions as much as possible,” said Mark Natkin, managing director at Beijing-based industry researcher Marbridge Consulting.
Google’s existing relationships could also provide customers-in-waiting for additional services it sells, like cloud hosting and business apps.
Launching a search engine is far from certain and hinges on the approval of China’s authorities, who frequently wield their power to block American tech giants from entering the market and competing with homegrown rivals. The plan also faces certain backlash from critics back home; six U.S. senators in a letter have called the effort “deeply troubling” and said it risks “making Google complicit in human rights abuses related to China’s rigorous censorship regime.” Google has declined to comment on the letter from senators.
...and growing faster than other regionscombined.
Source: S&P Capital IQ
In his three years as Google’s chief executive, Sundar Pichai has been a frequent visitor to the region, meeting with top Chinese officials and encouraging businesses to use Google’s free open-source tools like TensorFlow and Android—the mobile operating system which powers three-quarters of all Chinese smartphones.
Google’s investments in China this year have included $550 million for a 1% stake in local online retailer JD.com , along with investments in Chushou, a live video-streaming site, and Manbang Group, a truck-hailing company.
Google has held talks for more than a year with local partners, including Tencent Holdings Ltd. , about offering cloud-hosting services in China, said a person who was briefed on those talks. Under the scenarios that have been proposed, Google would sell software and hosting services that would run on a data center owned by a local company, the person said. The status of the talks, which were earlier reported by Bloomberg, is unclear.
A spokesman for Google declined to comment on the company’s talks with Chinese partners. Tencent didn’t respond to requests for comment.
During an appearance at the Chinese government’s annual cyberspace conference last December, Mr. Pichai said open-source software platforms like Android are helping to spur innovation from companies like Chinese phone maker Xiaomi Corp.
“That’s part of our goal when we develop these open-sourced platforms,” Mr. Pichai said. “Anyone and everyone can take it and develop things at scale.”
Google executives in China often point out that the company never actually left the country. It has more than 700 employees—roughly split between salespeople and engineers—across offices in Beijing, Shanghai and Shenzhen. That’s up from about 500 since 2015, the year Mr. Pichai became CEO. Late last year, it opened an artificial intelligence research lab in Beijing.
Xiaomi and other Chinese phone makers don’t pay Google to sell Android-based phones to customers in China. But they increasingly rely on Google services to help sell their phones to customers outside of China. Chinese manufacturers sell about 450 million phones to customers abroad every year that are preinstalled with Google’s standard suite of mobile apps, such as search, maps and email, according to Counterpoint Research.
By showing mobile ads and taking a cut of app-store sales on these devices, Google may generate up to $10 billion annually on phones made by Chinese partners, Counterpoint estimates.
With no search engine, Google has fewer opportunities to show ads to Chinese users and lags far behind Chinese internet giants Alibaba Group Holding Ltd. and Tencent in the sale of ads shown within the country. But as more Chinese businesses use advertising to reach customers around the world, they are buying ads on Google and Facebook.
Google doesn’t break out results from its China business specifically, but reported sales of $5.1 billion in its Asia Pacific region for the three months ended June 30. That amount grew 36% from the same period a year earlier, compared with 26% growth in Google’s total revenue over the same period.
Google ads have become essential for Chinese businesses like Yamibuy.com, an e-commerce store that sells most of its goods to customers outside the mainland, said Hans Tung, a partner at GGV Capital and investor in the startup.
Neo Niu, the founder of Chinese marketing company GrowthHash, said he relies on Gmail, Google Docs and Google Drive as his primary way of communicating with clients, half of which are outside of China. He pays for the business version of Google’s apps and accesses them through a virtual private network to skirt China’s censors.
It would be impossible to replace those tools with ones available in China, Mr. Niu said. “You have to put yourself in a client’s shoes—you have to use what they use.”
—Yang Jie in Beijing contributed to this article.
https://www.wsj.com/articles/google-woos-partners-for-potential-china-expansion-1534071600
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