Forbidden Country: China's Ban on Google Is Costing It Billions in Search Alone

Not being evil is expensive.

Even if you're not convinced the Goog has lived up to that lofty goal, it's tiff with China, ostensibly over principles is costing it plenty of principal.

Estimates of revenues foregone are only part of the story. The other part is that rivals like Baidu are establishing themselves as the go-to source for search in that market, making it hard to dislodge them - and adding substantial opportunity cost to the loss calculation.

And given Europe's apparent determination to crack down on Google in ways designed to make it hurt financially, the company will have to be very creative to make up the difference. JL

Chris O'Brien reports in Venture Beat:

Google is expected to capture 54.5 percent of search advertising revenue this year. But none of Google’s revenue comes from China, where eMarketer projects $14.90 billion in search advertising revenue in 2015.The lion’s share of that revenue is going to Baidu
It’s no surprise that by being blocked in China, Google is missing out on some serious search advertising revenues. But a new report today from eMarketer provides more insight into just how much Google may be losing.
For the first time, eMarketer has broken out search advertising as a separate category in its digital advertising reporting. To understand how much the ban may be costing Google, consider first that eMarketer projects around the world (including China), spending on search advertising will increase in 2015 to $81.59 billion, a 16.2 percent increase from the $70.1 billion spent in 2014.
Of that total, Google is expected to capture 54.5 percent of search advertising revenue this year. But none of Google’s revenue comes from China, where eMarketer projects $14.90 billion in search advertising revenue in 2015.
If Google could get even 10 percent market share in China, it would be worth $1.4 billion this year. Instead, it’s basically getting zilch.
The lion’s share of that revenue is going to Baidu. And it’s so large that Baidu will rank second in search advertising revenue on a global basis this year, ahead of Microsoft’s Bing and Yahoo by a large margin, according to eMarketer.
“Baidu is reaping the benefits of Google’s ban in China — and of course, a massive and growing Internet user population,” says eMarketer in its report.
While this report doesn’t cover it, this ban is no doubt being felt increasingly by U.S. companies like Facebook that are also locked out of this market. And the exclusion from China will only get more significant for Google and others over time.
As eMarketer notes, China’s search market is growing rapidly, and will likely eventually eclipse spending in the U.S. According to eMarketer, that $14.90 billion in China search advertising spending compares to $25.66 billion in the U.S. But China’s spending is growing by 32.8 percent this year – about double the overall rate of global growth.
“Baidu’s market share is a testament to the growth and influence of China’s digital ad market on the global stage,” says the eMarketer report.
Indeed, the rate of growth in China is so significant that the fifth largest search engine by ad dollars globally is Sohu.com, another competitor based in China. Sohu is projected to have $520 million in search revenue this year, behind Bing with $3.45 billion, and Yahoo at $1.9 billion.
But while Bing will grow 18.5 percent this year, and Yahoo will grow 6.9 percent, eMarketer said Sohu will grow a whopping 61.6 percent. At that rate, it could be the world’s No. 3 search engine in a few years.