Alphabet’s Plans for a China Comeback Go Beyond Google Search

BEIJING — Google has faced sharp criticism, including from its own employees, for its efforts to rebuild an internet search presence in China after quitting the country eight years ago over censorship issues.

But for Google’s corporate parent, Alphabet, the opportunities in the world’s largest internet market may be too good to resist. And the full scope of the company’s interest in China now appears to be broader than just internet search.

The latest hint came from Waymo, the driverless-car company that was spun out of Google in 2016. Chinese media noticed this week that the business had quietly registered a Shanghai subsidiary in May, suggesting that it wants a piece of an industry that the Chinese government has made a priority.

Other recent steps that Google has taken in China include opening a research center and promoting its software tools to developers.

In artificial intelligence and other areas in which Alphabet is seeking to advance the technological frontier, China today is more than just the planet’s biggest audience of internet users. It is an ecosystem of sophisticated potential business partners, talent and tech-hungry customers from which tomorrow’s innovations could emerge.

Other American tech giants have made their peace in various ways with Beijing’s strictures and conditions for operating in the country. Unlike Google, Apple runs its own app store in China, heeding government directives about the kinds of apps that can be available to Chinese users. Microsoft and Amazon offer cloud computing services, working with local partners and following strict controls on how customers’ data is stored.

Alphabet’s investments in future technologies make it particularly important for the company to get a foot into China early. Driverless cars have prompted regulatory and political debate, which means starting sooner could help reduce Chinese authorities’ concerns. More time in China for Waymo also means more experience on Chinese roads for its cars, and more data collected on the country’s driving environment.

“I think they’ve realized that developing in the United States won’t produce a car that will work in China,” said Gansha Wu, the chief executive and a co-founder of Uisee, an autonomous vehicle start-up in Beijing. “The road conditions are totally different.”

A Google spokeswoman said the company did not have a comment for this article.

For Alphabet, any play at significant expansion in China would bring unique challenges.

Its major moneymaking activities, such as search and video, run up against the Communist Party’s controls on information in a way that online shopping, for instance, does not.

Google would have to overcome a lack of name recognition among young Chinese. And it would face a tough fight against homegrown incumbents with Silicon Valley-like money to burn — including in areas like self-driving cars, in which Alphabet is arguably the global leader.

Waymo’s company registration in China still puts it a long way from having wheels on the road. Its Shanghai subsidiary has an initial capitalization of about $500,000. A visit on Friday to the address listed on its registration filing turned up only a cramped, unmarked office, empty but for some simple furniture.

Even with more investment, Waymo’s place in the Chinese market is hardly assured.

Baidu, maker of the country’s leading search engine, has made its autonomous-vehicle software platform available to dozens of local and foreign companies. SAIC Motor, China’s largest carmaker, is working with the e-commerce titan Alibaba. BMW and Daimler have received permission in China to test their own self-driving vehicles.

That might leave only China’s newer, smaller automakers for Waymo should it someday seek a local partner for building intelligent cars, said Yale Zhang, managing director at Automotive Foresight, a consultancy in Shanghai.

A Waymo spokeswoman confirmed that the company had set up and staffed a legal entity in China, but declined to comment on further plans.

Alphabet began taking baby steps to expand in China well before word got out this month about Google’s work on a censored search engine, code-named Dragonfly. This year, Google released a file-management app for Chinese users and a game on the popular social media tool WeChat. It recently opened a research center devoted to artificial intelligence and has invested in local companies, including the retailer JD.com.

Google never quit China entirely after shuttering its search engine here in 2010, citing censorship requirements and hacking attacks. But Beijing’s online controls have tightened in recent years, sometimes ensnaring even domestically run social media outlets. Last month, Facebook won approval to open a subsidiary in the eastern province of Zhejiang — only to see that approval quickly withdrawn.

If Google wanted to serve Chinese search users, it would face a formidable rival. For most Chinese, Baidu, which has a market capitalization of more than $70 billion, is about as synonymous with search as Google is for people elsewhere.

Smaller Chinese search engines receive relatively little traffic on their own apps and websites, said Juan Lin, an analyst in Shanghai with the research firm 86Research. Many of their queries come to them from external sources, such as WeChat — a sign of how little influence they command among Chinese web users, and of how much dominance Baidu enjoys.

“Search itself doesn’t have as strong a presence these days compared to 2010,” Ms. Lin said. Instead, she said, a big chunk of Chinese advertisers’ money now goes to newsfeed apps such as Jinri Toutiao, which serves people fresh articles and videos based on what they have read and watched in the past. Such apps, too, must be policed extensively.

Another potential avenue to more sales for Google in China would be to win permission to operate Google Play, its store for apps and digital media. Hundreds of millions of smartphones in the country use Google’s Android operating system, but people download apps from a variety of third-party sources.

For that, Google would likely need local help to win Beijing’s regulatory blessing. One potential ally is Tencent, the video game and social media behemoth. The two companies recently completed a deal to share patents. Tencent also offers cloud computing services. Google executives have said that they hope to make their cloud business a global operation, something that would be hard to achieve without being in China.

Making friends could benefit Google in other ways. It could cut deals with software companies to have its search engine embedded in their mobile browsers, or team up with phone makers to have its apps preinstalled on their devices.

In all of these areas, Google would need to overcome wariness among potential Chinese partners, said Ms. Lin of 86Research. Google left China in 2010 in a huff.

“Who would want to partner with a company that exited China because of its slogan of ‘Don’t be evil’?” she said.

Follow Raymond Zhong on Twitter: @zhonggg.

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