INTERNET – Google Eyes China App Store, Hardware Coming?

Bottom line: Google is likely to get Beijing’s permission to open a China version of its app store that could launch next year, paving the way for the roll-out of its smartphones in the market.

Google eyes China app store

A flurry of new reports are saying that global Internet giant Google (Nasdaq: GOOG) is planning to re-enter China by opening an app store there, in what would be a major strategic turnaround for the company. The real story of Google in China is quite complex, and to say it withdrew from the market in 2010 after a high profile spat with Beijing over censorship is quite an oversimplification. The more accurate story is one that’s seen Google diversify from its core desktop-based Internet services to an increasingly mobile portfolio that also includes a growing hardware component. That hardware element of its diversification could well be the focal point for a new China foray if the latest reports about Google’s plan to open a China app store are true.

According to the latest reports, Google approached Beijing officials last year about opening a China-based version of its Play Store, an online shop that offers thousands of apps for Google’s free Android mobile operating system. (English article; Chinese article) The source of the reports is a publication called The Information, which is citing several unnamed Google insiders.

The reports note that Google hasn’t received formal approval from China yet to operate the store, and it’s not yet clear if the company will receive such permission. Any green light would almost certainly require Google to ban apps that offered content or other services on sensitive topics like politics and pornography. Google’s reluctance to similarly self-censor its search results in accordance with Chinese laws was the main factor that led it to withdraw from the Chinese search market in 2010 after a high-profile showdown with Beijing.

That showdown certainly didn’t win Google any goodwill with Beijing, which received a black eye in the west for appearing to be heavy-handed and unwilling to compromise. Since then, however, Google and Beijing have reached a sort of peaceful co-existence, as each realizes it needs the other too much to remain enemies.

Google’s free Android operating system is now used by most Chinese smartphone makers, and is a key element behind the recent rise of domestic names like Xiaomi, Huawei and ZTE (HKEx: 763; Shenzhen: 000063). At the same time, Google also realizes that China is hugely important for most of its businesses, since it’s the world’s largest market for both traditional and mobile Internet use. Nearly every major western Internet company has a China strategy, and Google knows it would be foolish to say it never wants to develop the market again.

So, what are we likely to see next in terms of this Play Store initiative and beyond? As a user of an Android-based phone, I can testify that the Google Play’s international store is currently blocked in China. That probably isn’t because of any specific ill will by Beijing, but rather simply because Google doesn’t censor the store to keep out apps that China considers sensitive. If and when Google gets permission to open a China app store, I do expect it will get a bit of criticism from western anti-censorship groups that praised the company for its decision to withdraw from China in 2010.

Since its big blow-up with Beijing, Google has kept a low profile in China and adopted a stance that is less antagonistic. That approach, combined with the big presence of Android in the market already, should ultimately help Google win approval for its Play Store in China sometime next year. If and when that happens, we could also see Google move quickly to roll out some of its hardware in the market as well, beginning with its wearable glasses and smartphone line that it’s trying to reposition as a high-end brand that can compete with Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930).

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