Alphabet's Google could be coming back to China.
The search giant's mobile operating system, Android, dominates the world's most populous country, accounting for nearly 75% of the smartphones sold last quarter. Yet, despite its popularity, Google derives little value from Chinese Android users. The services it relies on to monetize Android in other markets -- Google search, Gmail, and Google Play (among others) -- are virtuallynonexistentin China, owing to the company's 2010 decision to withdraw from the country.
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That could be about to change. According to Reuters, Google will soon introduce a version of Google Play in China that conforms to Chinese laws, and if itsucceeds, could eventually roll out its otherservices. Still, it will face tough competition. There is no shortage of Android app stores available to Chinese consumers, some offered by major firms, including Baidu and Qihoo 360 .
Dozens of different app storesAll versions of Android that include Google's services are required to ship with its Google Play app store. However, device makers are free to include other, alternative app stores, and devices that do not include Google services -- like Amazon's Fire tablets -- can exclude Google Play altogether, relying on third-party app stores entirely.
In the West, Google Play faces competition from the Amazon Appstore and Samsung's Galaxy Apps, but still remains dominant. Google Play is far more popular with developers than the Amazon Appstore, sporting about three times as many apps in total. Other app stores are barely worth considering: App Annie, an app analytics firm, does not monitor any other Android app stores.
But the situation is wildly different in China, where many different (by some estimates, upwards of 200) app stores compete for Chinese Android users. Android devices sold in China do not ship with Google Play, or any of Google's other services, instead relying on alternatives. Often, device makers will bundle their own app stores or include ones from major Chinese Internet companies.
According to Newzoo, a gaming analytics firm that tracks app stores, Tencent's Myapp is China's most popular app store, reaching about 25% of Chinese Android users. Qihoo 360's 360 Mobile Assistant comes in second with 22%, and Baidu's Mobile Assistant comes in third with 17%. Despite not operating officially in China, Google Play comes in 10th, reaching about 5% of users.
These percentages represent tens of millions of users -- many of whom are remarkably engaged. As of May, Qihoo said its 360 app store had been installed on more than 800 million smartphones, and 130 million gamers enjoyed its mobile games. Baidu, which has an estimated 80% of the Chinese search market, integrates its search engine directly with its app store, giving it an advantage. In 2013, it reiterated its commitmnet to apps, acquiring 91 Mobile for $1.9 billion.
But massive upsideGoogle stands to benefit significantly if it can make Google Play succeed in China. Newzoo estimates that the market for mobile games alone will generate around $30 billion in revenue this year -- about 12% of that will come from Chinese Android stores. That share could increase in the years ahead, as fewer than half the Chinese population currently owns a smartphone.
It could also give Google an easy segue to reintroduce its other services, in particular, its core search service. With a population of over 600 million smartphone owners, the opportunity for Google's advertising business is massive. It won't have an easy time, but if Google does bring Google Play to China, it could ultimately be one of the more significant announcements to come from the search giant in 2016.
The article Google Play Will Face Tough Competition in China originally appeared on Fool.com.
Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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