Google in China

Google said China is the heart of the Internet. Despite losing market share in search, Google is expected to continue expansion in mobile, map and advertising.

“Search is only one piece of our business,” Eustace told reporters after the Google Innovation conference in Beijing last year. “There are lots of areas we can innovate. It’s not a narrow slice.”

Indeed there are. Google’s mobile operation system, Android, is seen as one of the rising product in China.

However, it is facing challenge from Baidu and Tencent, which is reported to build its own mobile operating system. Tencent plans to combine its mobile system with its QQ instant message service. New regulations in China has also hindered Google’s Maps product. China requires Map providers to apply an operation license. Google said it is still examining how the new regulations are going to affect their current operations.

Although mobile and maps are among the few rising stars, search remains to be Google’s best performing product. Its search market share slumped to about 26 percent from around 30 percent in 2009. On the other hand, Baidu took the advantage and owned about 73 percent market share from a previous 69 percent.

“Google’s China market share won’t return to the level seen before the incident, even though their revenue in China is increasing, the rate is much slower,” Li Zhi, a Beijing-based analyst with Analysys International told Reuters.

Google is seeing a growing trend of Chinese exporters who’re looking to expand their business beyond China. Their advertising products are focused on helping these exporters to connect with the rest of the world through its international search sites.

Brand advertising contributed 69 percent of China’s online advertising market in 2010. It is also expected to increase as more advertisers are looking to extend their reach beyond and within the country. Baidu is silently enjoying local ads sales.

China’s Internet growth has been really impressive. It has achieved double digit growth rate since 2006 and currently housed 420 million Internet users. There are also 755 million mobile subscribers in China, making it the world’s largest mobile market. Coupled with its recent patent growth strategy, China has all the assets to develop its own silicon valley in the next decade.