Google 99.9% sure it will shut China site: good news for Yahoo and Bing?

Talks with China over censorship have got Google nowhere fast and the search engine giant is now “99.9%” certain to shut its Chinese search engine, according to weekend reports. But what will its China exit mean for other search brands and furthermore, search advertising?

 If there were a set of traffic lights blocking Google competitors wishing to expand in China with a red light, it’d now turn green – or at least yellow.

There are more than 380 million internet users in China and the search engine market is now estimated to be worth over $1.5 billion. And it’s still growing! At a phenomenal rate, actually. From 2006 to 2010, it is expected to see a compound annual growth in excess of 30%.

But the Chinese internet market is still relatively young, and as the rest of the nation starts to get online, the size of its search market is set to rocket. Is it really a good idea for Google to get out?

Google seems to be holding its search engine to ransom. It’s annoyed it can’t get what it wants, but what Google is perhaps failing to realise is, if it exits China, it will lose a massive slice of the potential search marketing pie and could open the road for Yahoo to overtake it in the usage stakes.

Yahoo and Microsoft are on the path of assault and Bing is already doing incredibly well. Imagine if it goes into China and cleans up, picking up where Google left off. There’s a whole search worked out there, censorship or not, there’ll now be a huge gap in the search market in China.

Even though Yahoo has been present in China for some time, it has never enjoyed the popularity it would like – but China remains somewhat of an untapped market in an economy that is crying out for reform and change.

American brands have always performed well in China, with the Generation Y Chinese looking to align themselves with western values and ideals (it’s the stuff they see on TV after all).

Furthermore, Chinese internet users aren’t just searching for MP3s and playing online games. Over the next five years, the number of businesses launching their ads through Chinese search engines is predicted to increase at a rate of 17% annually, according to Backbone IT Group.

It says that online spending in China is finally starting to take hold: “Chinese internet users spent over $35 million online in 2006; an increase of almost 50% from 2005. Recent events in China, such as the Beijing 2008 Olympics further increased levels of online promotion and attracting even more advertisement opportunities.”

Google, if it does decide to leave China, will leave a 20% market share up for grabs – Baidu currently has a 65% share while Yahoo shares 15% with Sohu and Sogou.

Although holding great promise, the Chinese online market has proved difficult ground for many Western companies. The barriers to entry to the Chinese market are many – complex language, unique culture and a different legal system. But it’s not impossible to break into. Yahoo and Bing could certainly use the extra 20% share and advertisers would probably find it cheaper…Google could miss out on millions.

As China’s Minister of Industry and Information Technology, Li Yizhong said: “If you don’t respect Chinese laws, you are unfriendly and irresponsible, and the consequences will be on you.”