So just how much money is there in search in China?

Of course with yesterday’s “New Course” announcement there has been a lot of talk about Google surrendering the market to Baidu or other search engines in China.  But I was curious and decided to take a quick look at the numbers right now for revenues in search in China.  I was actually quite surprised at how little is being made there.  And as I thought about it, I realized this really isn’t about money at all, when you start to take this up the ladder to the global politics that might soon come into play. Baidu (BIDU) brings in about 3,194,000,000 in RMB per year, or about $467 million dollars annually.  This comes from revenue from search (i.e. ads) but also from subscriptions services offered by Baidu, some of which are notorious for providing links to copyright violating material (think Napster-like). Google (GOOG) has revenues worldwide of about $21,795,000,000 US$ per year.  This works out to about $419 million per WEEK.   So, even if Baidu was to explode tomorrow, and Google get all the of the revenues formerly received by their competitor, you’d be looking at something like a 2% increase in the overall revenue picture for Google.  Given that Google has only about 1/3 of the search traffic in China, you have to figure they are not bringing in more than $100-$150 million in total revenue from their operations there. For Google, that’s just chicken feed.  They spend more than that on green tech projects as sort of a side business. You have to start to look at the value of the Google brand, such as Gmail’s security, Google’s overall public relations (which is scoring a major coup today) and some new projects like the reliability of Android, Chrome and the GPhone.  These are multi-billion dollar projects in the future and with problems in China affecting the value of these brands, it starts to make sense, from a financial standpoint, to sacrifice Chinese search revenues for the long term value of the Google name. There is a lot of chest thumping on some of the nationalist messageboards in China, and I’ve even seen some posts saying that by leaving China, Google is going to hurt the overall US economy and continue the recession.  Some are playing this as Baidu beat Google at their own game, but the reality is probably a bit different than that.  Sure, Baidu has commanded a greater market share, but Google just went over their head and made it not Baidu v. Google but China v. Google.  In the worldwide court of public opinion, in which the reputation of “Brand China” and “Brand Google” are at risk, the issue of a few hundred million in search revenue grows even smaller.   The anti-China forces on Capitol Hill are now licking their chops.  There is a growing sense of an impending trade war and this spat may end up, in the long run, costing China, Inc BILLIONS should the negative perception of the Chinese government continue to grow and develop into economic sanctions of one sort or another.  China is starting the year as the ‘bad boy’ for their actions in Copenhagen, and now they have this problem to deal with.  In a country in which face matters, the Chinese government is certainly paying quite a bit of attention to the steady stream of supportive press that Google is getting for thumbing their noses at the rules.  This is going to be interesting…]]>

2 thoughts on “So just how much money is there in search in China?”

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.