Google Inc (NASDAQ:GOOGL) Backs Into China

Google inc (GOOG)

Google Inc (NASDAQ:GOOGL)(NASDAQ:GOOG) left China in 2010 when it got tired of the censorship demands of the Chinese government. The Information reports that Google is now planning to head back into China – this time Google wants to ride in with its Google Play app store. Part of the report that broke the news says, “As early as this fall, the company hopes to get Chinese government approval to distribute a special China version of its Google Play mobile app store for Android smartphones in the country.”

Google inc (GOOG)

China offers great prospects because it is the biggest Internet market in the world and Sundar Pichai, CEO of Google (after the change to Alphabet), told Forbes about the firm’s desire to go back to China. He says, “China is obviously one of the biggest markets out there… we have had a set of issues in the past, but we also see opportunities. We have seen a lot of interest from Chinese developers on Google Play… If we can figure out a model by which we can serve those users, it would be a privilege to do so.

Google sees money in China

The fact is that there’s money to be made in China and Google must comply with Chinese laws or forget about making money in the country. Andy Tian, CEO of Asia Innovations (a firm that makes apps in China) notes that “Google needs to be in China, period”.

He goes on to say suggest that the Chinese government is not likely to relax its censorship laws, but that Google (NASDAQ:GOOGL)(NASDAQ:GOOG) can find a way to still do business in China without breaking any laws. In his words, “Once in China, they can expand into other services. They need a beachhead, and the beachhead is Google Play.”

Global Internet ads revenue is expected to reach $133B by 2020. In the U.S. alone, online ad spending has increased from $4.9B in 2007 to $12.11B in Q4 2013 – even though it dropped to $11.6B in Q1 2014. Online ad revenues in China were 6.1 billion Yuan in 2006, but it has soared to 154 billion Yuan in 2014 to mark a 76.4% Y-O-Y growth from 2013.

Apple is already making money in China

Apple knows how to play the Chinese game, it dances to Chinese tunes and the firm made $13.2B in China in the last quarter. Granted, Apple’s business of selling iPhones contrasts with Google’s search ad(information) business – China is concerned more with the information that its citizens access than the phones they use.

Hence, it appears that Google’s (NASDAQ:GOOGL)(NASDAQ:GOOG) approach to getting back into China with its app store won’t raise eyebrows because there’s not much harm in downloading Angry Birds or Asphalt 8.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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