Googling at Google's Growth in Asia

By Peter Pham - May 3, 2012 | Tickers: AAPL, BIDU, GOOG, MSFT | 0 Comments

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Figures from Google’s (NASDAQ: GOOG) public data explorer show that the rate of growth of internet users is rising faster in Asia than anywhere else in the world. This is translating into soaring revenue growth from that area of the world for Google.  Internet advertising from mobile connections rose to $2.1 billion in 2011 and Google owns the advertising infrastructure for the internet at this point.

Google’s U.S. revenues dropped from 57% in 2006 to 46% in 2011.  The rapid growth in Asia has created the need for Google to create assets overseas.  They are building a $300 million data center in Kowloon, Hong Kong which will go live in early 2013(Google’s first outside the United States and Europe); the first of three planned for Asia as the Web giant expands to meet the region’s growing thirst for information technology.  They have also opened an office in Bangkok; using its ground level presence to run a Web education session with a number of NGOs and charities that operate in Thailand.

These Boots Were Made For Walkin’

Why this is so very important for Google is that for many Asians their first experience with the Internet is through a mobile device, either smartphone or tablet.  This puts a different sort of load on their network, and it only makes sense to host that data closer to where the greatest source of traffic is coming from.

This ties directly into their push to challenge in the social networking arena dominated by Facebook. Google is aggressively attempting to increase users of Google+, which they see as an integral part of their total user solution.  Part of their strategy has been to gain visibility through the acquisition of high profile users, like Barack Obama, whose G+ stream was flooded recently when China’s Great Firewall fell for a few days in February.  This same approach has been applied to Asia; collaborating with Japanese super girl band AKB48 in December. Google+ usage “exploded” amongst political candidates during the recent Taiwan election, which drew global attention due to its links with China.

Do Apples Dream of Androids on the Cheap?

Apple (NASDAQ: AAPL) has a very strong foothold in places like Vietnam, but Google and Android currently hold more than 60% of the Chinese mobile market, with Samsung having created a number of phones and devices that best show off the flexibility of the Android OS.  When, not if, the iPhone is available on China Mobile that will present a whole new level of competition for Google in the Mac daddy (all puns intended) of markets.  Android in its various incarnations create an interesting problem for Apple at the entry-level end of the market, which may be where Google can create millions of loyal users for its platform.

And that brings us to India, and the government’s project of producing the world’s cheapest tablet costing approximately $35 was launched in January based on Google's Android 2.2 operating system.  Google’s cloud drive has hit the market as well, playing catch-up to Amazon, with their free cloud storage and video streaming that is bundled with Amazon Prime and Apple’s iCloud.  

The Google Drive integrates Google Docs within it, similar to Microsoft’s (NASDAQ: MSFT) Sky Drive but the iOS app has yet to be released.  Not that the SkyDrive has set the world on fire or anything, lagging behind iCloud by over 85% in terms of registered users.  Windows 8, however will automatically sign people up for a SkyDrive account.  The power of the SkyDrive is from a functionality perspective, putting Office documents in the cloud to get real business done further un-bundling a person from their gadgets.  It will set itself apart as a business tool, in my opinion, leveraging the power of MS Office along with the cloud itself.  The SkyDrive conspicuously does not have an Android App, though it does have an iOS app.

The Story of G

Google’s core strength is the search space and its ability to monetize that strength through its advertising technology platform which is unchallenged.  While Bing and Yahoo together now account for about 30% of search in the U.S. the numbers are not increasing, as Bing’s gains are Yahoo’s and AOL’s losses, while Google’s market share slowly increases.  The challenge that Google is facing in Asia is in its implementation of the Chinese and Japanese character sets.  The adoption by Yahoo! Japan is significant and a big blow to Yahoo! and Microsoft as Microsoft could not deliver on Yahoo! Japan’s needs.  This is one of the reasons why they have such a strong presence here in Vietnam (90+), the westernized character set for Vietnamese is better suited to Google’s search algorithms. 

Google’s stiffest competition in China therefore may Baidu (NASDAQ: BIDU) since they are in discussion with Apple to be the default search engine on the iPhone in China.  Baidu’s market share in China is 77% versus Google’s 18% and they just announced a partnership with Microsoft to return Bing results for English language searches, of which there were 100 million in 2011.  At the same time Baidu is using Google’s own Android OS to build its own version, Baidu Yi, which will create a mobile platform for its suite of products. Dell’s Streak Pro D43 smartphone went on sale in China in February. 

Google’s other major hurdle is its relationship with the government to get open implementation of their platform there.  Their ouster from China emboldened Baidu to move aggressively with Baidu Yi.  The censorship row last year forced it to move its Chinese search engine overseas. In India also Google is facing charges for allegedly hosting offending content.  But, like everything these are temporary issues that the economics of which will overcome.  If 600,000 people can get around China’s firewall via VPN’s to access Facebook then Google and the Indian government can work out an arrangement on serving porn.

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