Google China Approval Could Restore Confidence Among Search Marketers

Hong Kong– China’s decision to renew Google’s Internet Content Provider (ICP) license clears the way for the search marketing company to regain advertiser confidence.

“We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China, ” David Drummond, SVP, corporate development and chief legal officer, wrote on Google’s blog on Friday.

In January, Google threatened to shut down its operations in the country, citing a “highly sophisticated and targeted attack” from China to hack the Gmail accounts of Chinese human rights activists.

At the time, the company decided it was no longer willing to continue censoring its results on in a move to assert its stance on free speech on the Web.

Antony Yiu, regional director, North Asia for iProspect, said marketers had initially reduced their search advertising budget for Google but restored spending after a couple of weeks because they were able to see a stable return on investment as before.

Despite various reports on Google’s unwillingness to yield to China’s stringent online censorship policy, Yiu says “the censorships issues have no commercial implications to marketers unless the product offering and the operating model changes”.

However, in compliance with China’s Internet law, the site had to redirect to a landing page in Hong Kong, raising doubts at the time among some marketers about the uncertainty of Google’s user base and market share in the country. On Monday, the site was continuing to redirect to Hong Kong; it was displayed in simplified Chinese characters.

Google’s market share in China may have been eroded as a result of the standoff. According to iResearch, a Shanghai-based research firm, Google’s market share for Q1 2010 dropped year on year from 33 percent to 29.5 percent, while its rival Baidu increased in the same period from 62.3 percent to 67.8 percent.

According to the market research company, China’s total search engine revenue totaled more than (U.S.) $282 million for the first quarter of this year.

China’s renewal of Google’s license, Yiu said, will help advertisers regain confidence in the company, in particular, when allocating advertising budgets on Google for upcoming marketing campaigns.

A Google spokesperson said they will clarify what products the company will offer locally through in the coming days.

While Google might be the most popular search engine in most markets worldwide, in China, Baidu dominates the local search landscape.

In recent months, various reports had speculated that emerging search players in China such as Tencent’s Soso, Netease, and Sina will dilute market share from Baidu if Google had blacked out from the country.

But Yiu says the new players currently possess little market share and their search product offerings are still under development.

He added that most of these smaller search engines have a very young user base, mostly comprised of students who have minimal disposal incomes compared with Google’s middle to affluent consumer base, which are usually the key targets of many marketers.

Earlier this month, Google has made a further investment in a local online music provider, a partnership that both companies forged since 2007, to provide online music through legal downloads in China. The site claims to boast a music library of more than one million songs.

It is understood that Google has been trying to push display ad sales on the Chinese music search portal in recent months but marketers are sitting on the fence to advertise via this product offering as they determine the actual size of the user base using the music service.

While China approved the ICP license for Google, another challenge awaits.

The State Bureau of Surveying and Mapping has approved 13 local companies including Baidu, to operate Internet map services in China but not Google in its first round of qualification.

Google’s failure to secure a license from the SBSM will not only affect ads that are currently served on the Google Maps site, it would be unable to offer Internet mapping services via mobile phones in the country.

This would thwart the search giant’s global plans to focus on monetizing its mobile advertising and services, forecast to gain rapid growth in the next three years.

Google first established its presence in China in July 2005 and launched in 2006. The company has local sales teams in key markets of China in Beijing, Shanghai and Guangzhou.

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