* Google largely quit China five years ago
* New CEO eyes return via Play app store
* But Chinese rivals have grown, unlikely to give way
By Jeremy Wagstaff and Paul Carsten
SINGAPORE/BEIJING, Sept 10 (Reuters) - Google Inc CEO Sundar Pichai has made no secret that he wants to get back into China via Google Play, the app store for its Android mobile operating system.
But it’s unlikely to be a smooth ride.
Google largely pulled its services out of China five years ago after refusing to continue self-censoring its search results. Since then, it has maintained a limited presence in the world’s biggest Internet market, but most of its services, including Play, have been rendered borderline inaccessible.
“Google needs to be in China, period,” says Andy Tian, CEO of Asia Innovations, a Chinese app developer and former Google executive. “Once in China, they can expand into other services. They need a beachhead, and the beachhead is Google Play.”
Google declined to comment on reports it plans to ramp up its Play store in China this year. Instead, it pointed to comments Pichai has made about exploring how to bring Google Play to China.
But Tian and others say Google has lost basically all ground in most of its major services, especially search and video streaming, to Chinese players such as Internet giants Baidu , Tencent, Alibaba and Qihoo 360 . All have built their own products and services to replace or even surpass Google’s offerings.
In China and elsewhere in Asia, the centres of gravity in mobile have shifted away from app stores as the point of control to applications like messaging, which act as gateways for third parties to provide services.
Tencent’s WeChat, a messaging app originally similar to WhatsApp, has become a digital Swiss army knife, allowing its 600 million monthly active users to play games, book cabs and make payments, among many other things.
But China is too big a market for Google to ignore. Apple Inc complies with local laws and made $13.2 billion last quarter in Greater China, which includes the mainland, Hong Kong and Taiwan, making it its second-biggest market.
Some in the industry doubt whether Google can use the Play store to help get its other services into China as domestic rivals are now well established and Google would have to comply with Chinese law. That would mean storing all data in China, and meeting information access and censorship requests, a thorny issue, particularly if the U.S. government gets involved.
Others say focusing on Google Play may make things easier. Chris MacDonald, a business ethics expert at Ryerson University in Toronto who oversaw a case study about Google’s operations in China while at Duke University, says Chinese regulators will see Play as less threatening than Search and Gmail, reducing the frequency of government-led probes.
“It’s highly unlikely the Chinese government is going to come asking, ‘Did anyone download Tetris?’” he said. “If Google doesn’t have any highly private information, it can’t be asked for highly private information.”
China will this year become the world’s largest mobile gaming market by revenue, earning more than $6 billion, says Peter Warman, CEO of Dutch mobile analytics company Newzoo, which analyses data from its Chinese partner TalkingData. Up to 90 percent of money spent on mobile goes to games, he said.
Google Play is available in China, but reaches only 21 million of an estimated 800 million Chinese mobile users, Warman said. The primary app stores of Internet giants Qihoo, Tencent and Baidu account for two thirds of the market.
These players are unlikely to give away that advantage.
And handset manufacturers like Huawei and Xiaomi have their own app stores which not only bring in revenue but enable them to control how their devices look and feel, at least in China.
“The fact of the matter is that Google is late to China. Maybe almost too late,” says Shiv Putcha, who covers mobile in Asia for IDC, a consultancy.
Indeed, some question whether China needs a single Google-controlled app store.
Rohit Dadwal, Managing Director Asia Pacific at the Mobile Marketing Association (MMA), says his organisation has worked with mobile players and app stores on standards and guidelines that help brands measure the success of their ads, a key source of revenue.
“It’s not the Wild West,” he said. “It’s a diversified, fragmented market, but each niche provides value.”
For some local developers having a single market place would be a boon, since it would free them from the restrictions and quirks of app stores. Piracy and malware are problems too: a study by Tsinghua University, Microsoft Research and China’s Ministry of Science and Technology found that only a quarter of apps on local app stores are safe.
But, says Tian and others, it would make most sense for foreign developers trying to break into China’s market. Of the revenue generated by the top-100 games in China, only a tenth goes to publishers outside China, says Newzoo’s Warman.
“If they could pull it off it would be good for the ecosystem, but it’s going to be tough,” said Adam Morley, Beijing-based product manager for Chinese social app Nice.
“You have a lot of players with skin in the game in a position of power.” (Reporting by Jeremy Wagstaff and Paul Carsten; Additional reporting by Heather Somerville in SAN FRANCISCO; Editing by Ian Geoghegan)