Google and China are more like oil and water. The Google magic touch seems to be impotent in the world’s largest and fastest growing market. In fact, it’s one of the few (if not only) major market where Google faces numbers that it is usually handing out to its competitors since Chinese engine Baidu has a 70% share of the search business in the world’s largest country by population.
So what does Google do to combat this? It axes arrangements with seven large ad resellers that represent an estimated 40% of Google China’s revenue (about $226 million).
Google Inc said on Tuesday its termination of contracts with seven large Chinese advertising resellers goes into effect on Oct 27, a development analysts say benefits China’s leading search engine Baidu.
“The letter was sent out to them on September 27… We gave them a month’s notice,” Cindy Qin, a spokeswoman for Google told Reuters, confirming it will take effect on October 27.
“We hope to find new resellers to partner with so we can provide even better service to our advertisers,” Qin said.
The reason? There was none stated. Google has a unique way of doing things anyway, which has led to great success in the four corners of the globe except China. Since the Chinese market is an enigma of sorts (actually it’s a difficult government and a relatively closed Internet approach that is the trouble) it doesn’t seem crazy that Google does something that looks drastic. Or does it?
My guess is that there has to be a lot more here than this report is giving us. Not many businesses voluntarily cut 40% of their revenue stream with little notice and no reason. Something is up. Of course, not many businesses are sitting on the pile of cash that Google is sitting on which gives Google the freedom to do something that appears a bit crazy to us mere business mortals.
It looks like Google’s most excellent Chinese adventure is only getting more difficult rather than turning around from its history of difficulties. Where will this end for Google? Who knows. The question is whether or not Google is willing to stay in and fight, walk away or maybe they have something up their sleeve to make this work.
Which do you think it is? Or is it something else entirely?