Google’s Moneymaking in China

For Scott Beaumont， Presi- dent of Google Greater China， it is a depressing question about “whether Google is still in China”. If he said he was working for Google in London， most of the hearers would express their recognition and fondness of Google’s products. But in China， Google cannot provide a whole set of its products， making many Chinese people take it for a mere search engine C and an unstable one.

“We are actually providing many services for commercial clients by helping them expand the business around the world. This could bring a great sense of achievement to Google，” said Beaumont.

On May 7， Google signed a cooperative memorandum with the development zone in Tianjin. According to it the foreign trade ecommerce companies in Tianjin can make use of Google’s overseas channels and technological advantages in the marketing， with which they can get more orders. This is one of the rare cases for Google to appear in Tianjin after its search business gradually faded away from China.

Prior to that， Google reached a similar cooperative memorandum with Henan Provincial Department of Commerce to help more Henan-based enterprises develop the cross-border ecommerce business in the overseas market. Soon after that， Google set up an AdWords Experience Center C the first one ever in China C in Zhengzhou， capital city of Henan. A data sharing agreement was also signed between Google and the commercial department of Henan government， which was said to be able to help small enterprises in Henan to develop in the overseas markets.

“The cooperation between our enterprises and Google has the same effect of setting up representative offices by these enterprises in foreign countries，”said Wu Yuanqi， director of Henan Provincial Administration of Ecommerce.

“China is the world’s largest con- sumer market and second largest online ads market which keeps growing bigger. Therefore， the Chinese market is of vital importance for Google’s development，” Beaumont said.

Beaumont was appointed President of Google China in October 2013. His judgment of the importance of the Chinese market for China is supported by a group of data. In 2013， the exports volume of China reached 13.7 trillion yuan， up 7.9% year on year. In recent five years， the online consumption volume in this country grew at a 90% annual growth rate， much higher than the 9% annual growth in the U.S. Particularly， China has an excellent performance in the sector of ecommerce. In addition， China is expected to see the sale of 430 million mobile phones C up 15% compared with last year C in 2014 and the sales revenue is expected to increase by 53% to US$87 billion， surpassing the U.S. for the first time.

“China is a great market. For Google， there is still a great develop-ment space. The digital marketing via search engine has a greater significance in China than in other countries. The potential is hidden in the industries which have not embraced digital marketing，” said Beaumont.

For many consumers， Google is just the search engine， map， Android or glass. These services and products have been deeply rooted into people’s minds， but for Google， its profits mainly come from its advertising service， which contributes 90% of its revenue.

Google is also the biggest winner in the global mobile advertising market. The market research company eMarketer reported that Google took 39.9% of the digital advertising market in the U.S. in 2012. It was followed by Facebook （7.4%）， Microsoft （5.9%） and Yahoo （5.4%）. In 2012， Google’s share in the global digital advertising market reached 31.4%， the highest in the world. In 2013， the figure increased to 31.9%.

In spite of the great performance， Google is still deeply attracted to the Chinese market. Beaumont talked about an interesting phenomenon. “I heard that if Friday is a legal holiday in China， people must go to work on Sunday to create a holiday that lasts several straight days. This is strange for Europe. But I prefer this way. This shows that Chinese people treat their work differently from other places.”

Who Are Google’s Types？

The diligent working attitude of Chinese people shed light onto Google’s business in this country. It has tailored a plan and target for the Chinese market. Now， its clients of digital marketing consists of big companies like Huawei and ZTE， as well as Milanoo， Netsu and other small companies.

Huang Xiulan， general manager of Google China’s big client department， said that the cooperation between Google and Huawei had already covered the major markets of West Europe， North America， Asia-Pacific and Middle East. When Huawei launched its Ascend P6 in 2013， Google cooperated with this company on a comprehensive promotional campaign， covering search engine， advertisement display， video display and so on. In that period， the traffic volume through Huawei-made terminals increased 40%.

“The global cooperation between Huawei and Google in 2013 got wonderful achievements. This was particularly the case when Ascend P6， one of Huawei’s best smartphones， came out in the market. The video-based promotion in Google YouTube helped P6 earn over 5 million watches in two months. We hope that we can have further co-operation with Google in the digital marketing，” said Huang Di， director of Market Communication Department of Huawei’s Consumer Business.

Though the Chinese consumption market is very big， many small enterprises there are facing vile competitive circumstance which crawls with price wars and cut-throat competition. Therefore， the foreign trade is an important path of survival. In addition， the exportation is an important contributor to China’s growth. China’s 12th Five-Year Planning for the Development of Service Trade mentioned that China would intensively develop the foreign trade of service. The exports and imports volume of China is expected to reach US$600 billion by 2015 with the annual growth rate of over 11%.

Chinese companies are undoubtedly confronted with many problems when they go out， such as the linguistic and cultural differences， as well as the search for the emerging overseas markets. The mobile Internet reduced the gap between Chinese enterprises and the international market. Google makes use of its online marketing tool and digital ads， such as Google AdWords， Google Display， video ads， mobile ads and Google DoubleClick， to bring these enterprises to various places in the world for business.

Milanoo is a clothes trading company which sells its products to foreign countries via the ecommerce. It had only four members when it was founded in 2008 and the situation was cruel. When the Chinese domestic B2C market was raging and full of competition， Milanoo chose to work with Google AdWords to get more visits and clicks in the overseas markets. A director of Milanoo said that 90% of their resources were put into the Internet marketing and 98% of this investment was thrown into Google. Now Milanoo owns 150 employees and provides services for over 100 thousand in more than 170 countries and regions.

Now， Google has three offices in China， which are respectively located in Beijing， Shanghai and Guangzhou. They are mainly engaged in the development of products and marketing services. Speaking of the cooperation between Google and Chinese enterprises， Huang Xiulan introduced a case： “We once helped a client expand a non-English market. Through the analysis by multiple tools of Google， and the assistance of our foreign peers， we established India and Russia as the potential targets. When we compare these two markets， we found that the Indian market had a lot of clicks， but very few consumers would actually pay for the products. Therefore， increasing the investment into the ads in this market will lead to meaningless waste. In comparison， the Russian market boasts a great demand. Therefore， we recommend our client to the try the Russian market and make corresponding change in languages and setting. After a round of intensive advertising， this company got successful in Russia， which has become its largest non-English market.”

In 2014， Google is still aiming at helping more Chinese enterprises go to overseas markets. Beaumont said： “We have been trying to do well in China. No matter they are big enterprises or small ones， Google can easily help find and track potential clients around the world with AdWords and so on”.

Google’s Challenges

Though Google can provide precious assistance for small companies in China in developing in the overseas market， the brand power and service/ product quality are still the key elements for the enterprises to go out. This is a significant challenge Google has to face now.

Before taking over the presidency of Google China， Beaumont visited China several times. His experiences in KFC offered him some enlightenment.“Though KFC is very popular in China and boasts a lot of popular food in China， it still thinks it necessary to relentlessly adapt itself to the Chinese market. I went to KFC’s restaurants in UK too， but the experiences there are very unlike the one in China. From these experiences I conclude that KFC knows how to get used to the market. Thus， in my opinion， the key to success lies with the timely and flexible change to the market to satisfy its market.”

The problems of Google’s search engine， map and Android in China mean that the company did not get success in the individual consumer market.“How to solve this problem takes time. Sometimes people are confused and take Google for a single search engine， but we are more than that. Without the search engine， Google could still be successful in China，” said Beaumont.

Google has the advantages in software and hardware in helping Chinese enterprises develop in the overseas market. But in the China’s domestic online ads market， it has to face the competition with local companies like Baidu and Alibaba.

Baidu is considered to be the strongest rival for Google in this matter as it is in the search engine market. According to Wang Ningyuan， analyst from China Investment Consultancy， Baidu Promotion is an Internet promotion that charges clients based on the effect. Therefore， a small amount of investment can help enterprises recruit a lot of potential users， improve their brand awareness and fame efficiently. Simply speaking， the more you have paid， the higher ranking you will get among the search results of Baidu.

Different from Baidu， Google does not mix the search results with the ads. In addition， Google pays more attention to the contents of the target webpages. This means that the money is not the only factor to determine the position of the ads.

“Though Google cannot be as flexible as Baidu in the domestic market， Google still has its advantages： its users are mostly well-educated and they search for things with more academic or commercial significance. This could be the magnet for some specialist companies，” said Wang Ningyuan.

“Our advantages are with our technologies， talents， quick adaptation and our partners. In addition， we have outstanding vision and excellent execution，” said Beaumont. “China is a grand market. I believe there is a great development space there. The problem here is which partner we should find to ensure the success.”