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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Google Play Has Launched

First appeared in Mercury News

The Android Market, where Google (GOOG) distributes mobile apps and other digital content, is getting a revamp -- to be replaced starting Tuesday with a newly named "Google Play" store as the company moves to compete more directly with Apple (AAPL) and Amazon as a seller of digital music, video, games, apps and books.

First launched in October 2008 after the first Android smartphone went on sale, the Android Market was primarily a place to download smartphone apps. But with Google adding movie rentals and a streaming music service in 2011, the company now is trying to create a unified, easier to navigate online store that it says will make things better for consumers and content creators alike.

Google Play launches worldwide Tuesday on the Web and over the course of the week for people connecting with Android smartphones and tablets. Analysts said Google is making a crucial, necessary step to match its competitors by putting all its digital offerings in one store, and posting the equivalent of virtual signs in the aisles so consumers can more easily find the things they are looking for.

"For the users, it's really about delivering this simpler, more integrated experience," Chris Yerga, Google's engineering director for digital content, said in an interview. "It's sort of like the chocolate and peanut butter thing -- the whole is greater than the sum of the parts. It's going to attract more purchasers to the store. It's good for us -- it's good for Google -- but it's also good for our content partners."

As Google tries to compete with Apple's integrated system of iPhones and iPads connected to the music, video and books in its iTunes store, a better, easier-to-use content store is critical for the Mountain View Internet giant, said Mike McGuire, an analyst with Gartner who follows the digital content market.

"The biggest challenge they have is they don't have near the level of control that Apple does," McGuire said. "They don't control all the hardware like Apple does, but they can make the navigation and the discovery of either content or apps easier. They have to do this. It's a crucial step for them."

Google's content model differs from Apple in that it is more oriented around the Internet cloud, meaning digital music or books are generally stored on Google's servers, and streamed to Android phones and tablets through an Internet connection, rather than being stored locally on the device as it typically is with Apple's system.

The upside of the Google model is that there is no need to plug one device into another to sync content, and your books, games or music follow you seamlessly from device to device. The downside is that in remote areas where no broadband connection is available, there's sometimes no way to access what you want.

For content providers like Glu Mobile, a mobile gaming company that makes games for smartphones and tablets that run Google's Android, Apple's iOS and Microsoft's Windows Phone software, a new Google Play store that allows people to easily find games is critical to the success of Android.

"You can have the best game in the world, but if people can't find it you're dead in the water," said Adam Flanders, senior vice president of sales and marketing for Glu Mobile. "If people can find the great content, then it benefits the game companies like us."

Flanders said Glu Mobile is "absolutely excited" about the Google Play store, because it can help the San Francisco company take better advantage of the Android smartphones and tablets in use, a huge number that despite its size, analysts say, is not as lucrative as Apple's. Android chief Andy Rubin said last week that 850,000 new Android devices are being activated every day.

Yerga said the consolidation of separate stores for e-books and music into Google Play is just one step in how Google intends to improve its digital content offerings.

"I think of this as a commitment or a confirmation that Google is really serious about digital content," he said. "One of the great things about Google Play is it kind of solidifies things, and it gives us a great foundation for building new features and expanding our offerings going forward."