It has never been clear why Google has had such a small market share in China compared to most other major countries. One theory is that the government has favored local search engines, particularly Baidu, Inc. (NASDAQ: BIDU). Another is that Google has not been willing to censure its results to the extent that the central government has mandated. No matter what the cause, Google’s share in China, the world’s largest online market, is barely above 1%. That robs it of a major revenue source.
Local search company Baidu has 69% of the market. It was founded in 2006. It is relatively small by Google’s standards. Baidu’s second-quarter revenue was $3.7 billion. Google parent Alphabet Inc. (NASDAQ: GOOGL) had revenue of $38.3 billion for the same period. Of this $21.3 billion came from search.
Another Chinese company has a much larger share of the market than Google does. Sogou, Inc. (NYSE: SOGO0 was founded in 2010. It currently has 21% of the China search market. Shenma Inc. is a search engine built for China’s mobile devices. It has a market share of just under 5%.
How large is the potential market Google has been blocked out of? Estimates are that the number of internet users in China is over 900 million people. The number was posted recently by the government’s China Internet Network Information Center (CNNIC). The U.S. figure is about 300 million. The financial value of each person online in the U.S. is likely much greater than in China because Americans have a relatively higher income. Search traffic is supported by advertising, the value of which is determined to some extent by income.
If Google is actively throttled in China, which is certainly the case, it will continue to be painted out of the largest internet market in the world.