Google's revenue generated through Chinese companies willing to promote their businesses overseas is likely going to be the target of the Chinese authorities, after Beijing reportedly planned to launch an antitrust investigation against the US tech giant
MOSCOW (Pakistan Point News / Sputnik - 01st October, 2020) Google's revenue generated through Chinese companies willing to promote their businesses overseas is likely going to be the target of the Chinese authorities, after Beijing reportedly planned to launch an antitrust investigation against the US tech giant.
As the Trump administration targeted Chinese tech companies like Huawei and TikTok with export bans and market access restrictions in recent years, the Chinese authorities in Beijing were preparing to start an antitrust probe against Google amid rising bilateral tensions, Reuters reported on Wednesday.
However, as most of Google's services are blocked in the Chinese market, Beijing could face limited options to punish Google even if it finds the company guilty in the antitrust probe.
Google officially withdrew from the Chinese market in 2010 when it openly decried the excessive censorship demands from Chinese authorities. After the company's exit, China gradually blocked all of Google's popular services including Google Search, YouTube, Google Play, particularly, its content store on Android devices, and Maps.
Similar to many other US tech companies, Google and its parent company, Alphabet, offer most of their popular services free of charge. For example, when smartphone vendors use the popular Android operating system on their devices, they do not have to pay a licensing fee to Google. Instead, Google generates profits from Android devices after users install Google Mobile Services, such as Google Play, Search, YouTube and Maps.
In addition to content sales on the Play Store and premium membership fees on YouTube, a large share of Google's revenue is generated from ad sales on the company's various free services.
According to Alphabet's earnings results for 2019, the company generated $161.9 billion in revenue during the fiscal year and $134.8 billion of that revenue came from advertising.
However, as none of Google's popular services is accessible in China, the company could not profit from ad sales in the Chinese market. For example, although most Chinese smartphone vendors use Google's Android operating system on their devices, Google could not generate profits from those devices, as they do not include Google Mobile Services, which are the key to Google's advertising revenue.
Instead, Google could only benefit from Chinese companies that are willing to promote their products and services in the overseas markets, where Google's services are popular.
CHINESE FIRMS SEEKING EXPANSION MAY BE AFFECTED
Google's revenue from the Greater China market, which includes mainland China, Hong Kong, Macau and Taiwan, posted a 60 percent year-on-year growth to $3 billion in 2018, the Information reported in 2019, citing unnamed sources.
According to the report from the Information, Google's clients in China included top Chinese tech companies such as Alibaba and TikTok, which both wanted to promote their services in the overseas markets. Chinese exporters eager to market their products in the global markets also contributed to Google's revenue from ad sales, the report added.
If Chinese authorities want to punish Google over antitrust violations, the company's revenue from ad sales to Chinese clients could become a key target. But any restriction on Chinese companies' access to Google's advertising services could also hurt those companies' efforts to expand in overseas markets, where Google's services remain largely popular.
For Google, losing the $3 billion revenue from Chinese clients would have little impact on its overall global advertising revenue that stood at $134.8 billion in 2019.
Nevertheless, as Google reportedly tried to reintroduce its Play Store and a controversial censored version of its search engine, known as the Dragonfly Project, in China, any restrictions resulted from a possible antitrust probe could hurt the US tech giant's efforts to regain access to the Chinese market.