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Thursday, May 24, 2012

Google App Store Censored in China

Story first appeared in Bloomberg Businessweek.

Google Inc.'s Android operating system runs two-thirds of the smartphones sold in China yet the company’s online app store, Google Play, isn’t open for business there because of censorship concerns. That’s creating an opportunity for China Mobile Ltd.

The world’s biggest phone company by subscribers opened its Mobile Market store for Android apps in 2009, and it now has 158 million registered users. Customers have downloaded more than 630 million apps, making Mobile Market the world’s largest carrier-operated app store.

The success of Mobile Market comes at a welcome juncture for the wireless giant, fueling revenue growth as its core business matures. China Mobile competes with Apple Inc.’s App Store in a nation where Analysys International said mobile applications and services are set to jump 80 percent to 220 billion yuan ($35 billion) this year as cheaper smartphones make surfing the Web more affordable.

Without having to compete with the official Google store, China Mobile has an opportunity that operators in other countries don’t have. China Mobile’s relationship with subscribers leaves it well- placed to take advantage.

The carrier’s data services business, including Mobile Market, jumped 15 percent last year to 139.3 billion yuan, compared with an 8.8 percent growth in total sales.

Facebook, Twitter

China Mobile shares fell 0.8 percent to HK$81.90 in Hong Kong trading today, trimming the gains this year to 7.9 percent.

Shipments of smartphones in China are projected to jump 52 percent this year to 137 million units, overtaking the U.S. for the first time as the world’s biggest market, according to a March estimate from market researcher IDC.

Phones running Android accounted for 68 percent of sales in the fourth quarter, while Apple’s iPhone made up 5.7 percent, according to Beijing-based Analysys International. Apple’s online store generated about $2.9 billion in global app sales last year, compared with about $618 million for Google, Kent estimated.

All Web content in China is censored, and that control extends to online stores selling apps, games and e-books. Both Mobile Market and Apple’s Chinese-language store, which takes payment in local currency, abide by government censorship restrictions and don’t offer apps to access the blocked websites of Facebook Inc., Twitter Inc. and YouTube Inc.

Google Censorship

Google said in January 2010 it was no longer willing to self-censor content for Chinese services, so it shuttered its local search page and redirected users to a Hong Kong site. A Tokyo-based spokesman for Google, declined to comment on why Google Play was unavailable in China. The store has more than 450,000 apps and games, the company said in March.

China Mobile’s store has 68,663 apps, compared with 560,957 for Apple. Mobile Market’s offerings include Instagram Inc.’s photo-sharing and editing software, and Rovio Entertainment Oy’s Angry Birds, Angry Birds Seasons and Angry Birds Space.

China Mobile’s sales from applications and information services grew 12 percent to 48.4 billion yuan last year, accounting for 9.2 percent of total sales and overtaking text messages as the company’s biggest source of data revenue.

Drive Traffic

That total includes 22 billion yuan from mobile music, 1.5 billion yuan from mobile e-mail services, 627 million yuan from e-books and 571 million yuan from mobile videos, according to the company’s annual report.

Mobile Market has become the world’s largest Chinese- language application software platform.

Sales from the Mobile Market last year were about 23 million yuan, though the traffic generated by app downloads among China Mobile’s 667.2 million mobile-phone subscribers is more important to the carrier.

China Mobile is forecast to post its third straight year of sales growth after reporting revenue gains of at least 10 percent from the time of its 1997 Hong Kong listing through 2009. Sales growth may slow to 7 percent this year, according to the average of 31 analyst estimates compiled by Bloomberg.

Unicom, Telecom
China Mobile isn’t the only local company looking to fill the Google gap for Android apps. Analysys International tracks 13 major app stores in China, including from carriers China Unicom (Hong Kong) Ltd. and China Telecom Corp., and device makers including Lenovo Group Ltd.

One thing that may help China Mobile generate sales is that it offers the highest percentage of paid apps versus free apps among all stores in China. Mobile Market charges for 91 percent of its apps, while China Unicom charges for 77 percent and Apple’s for 48 percent.
Many games in China Mobile’s shop are offered in local currency prices that range from the equivalent of 50 cents to $1.50.

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