China's 750 Million Internet Users Too Big a Temptation for Google

Based on China government statistics, there are over 750 million internet users in the country. Over nine out of ten of them access the internet on mobile devices. And the penetration of internet users to the population is a little more than half compared to well over 95% in the U.S.  Alphabet Inc’s (NASDAQ: GOOG) Google has allegedly taken aim at a better market share in China, which will mean censoring some of its search results. The market may be too large for Google to stay away, no matter what the cost.

Google’s plans have drawn sharp criticism from many of its employees who believe in free speech. Google CEO Sundar Pichai says the search engine company will not enter China soon. That does not mean, however, that Google does not have plans, and possibly a timeline.

Stat Counter numbers show that even if Google wants to get a large presence in China, it is up against the entrenched competition. This means the major search properties have already accepted censorship because the government regulates the internet too much for the case to be otherwise.

Baidu, Inc (NASDAQ: BIDU) has nearly 75% of the market. Shenma has another 15%. And, these are China-based companies. Google’s current share is barely above 1%. Even with censors results, it is hard to imagine how Google could get more than a few percent more. However, it is a few percent of an internet market which could number over one billion people in less than a decade.

Google’s other hurdle is the extent to which ads which run next to search results will be censored in China. Google’s primary revenue comes from this advertising system.  While censored results may get it users in China, further censorship of ads may make its road to a profitable business in China harder.

While Google’s management says it has no near-term plans, it cannot afford to stay out of China altogether if it wants it global market share to grow.