When it comes to mobile, China represents quite the paradox for Alphabet/Google (GOOGL) . On one hand, there's no other country with more users of the company's mobile operating system. On the other, the vast majority of the Chinese devices running the OS don't contain any of Google's apps and services.
That's what makes a fresh report about talks to launch Google Play in China intriguing. Though such a deal wouldn't amount to a full return of Google's services to the Middle Kingdom, and although local app store competition abounds, the need for the company to have a meaningful app distribution channel in China has never been higher.
Sources tell The Information that Chinese online gaming/content provider NetEase (NTES) has approached Google about launching Google Play in China through a JV. The site cautions it's unclear if the talks will lead to a deal, and that past discussions between Google and Chinese tech companies haven't resulted in anything.
Reports that Google wants to launch a Chinese app store go back as far as 2014. As far as partners go, Google could do worse than NetEase, which for years has teamed with game publisher Activision (ATVI) to offer World of Warcraft in China.
A booming Chinese app store market provides Google with a fresh incentive to do a local Google Play launch. Research firm App Annie believes publisher revenue stemming from Apple's (AAPL) Chinese iOS App Store more than doubled annually in the fourth quarter to over $2 billion, leading it to surpass the U.S. as the world's most lucrative App Store market.
Revenue numbers are harder to come by for China's fragmented Android app store market, but with Android accounting for over 80% of Chinese smartphone sales, it's a safe bet that the total market is substantial. China now has close to 600 million smartphone users, and the lion's share are on Android.
A Chinese Google Play would also provide Google with a means of distributing some of its many mobile apps within the country. It's unlikely to include Google Search -- AWOL in China since 2010, after Google chose to shut down its local search engine rather than continue censoring its results -- or YouTube.
But apps and services for which censorship is less of a concern, such as Google Maps, Apps, Photos and (assuming a third-party search engine is integrated) Chrome, could be easier to provide.
In addition, bringing Google Play to China would help Google make inroads with Chinese developers at a time when many of them are at the vanguard of creating cutting-edge mobile apps and services, particularly related to messaging, payments and e-commerce. Forging direct ties with more of these developers could lead a greater number of them to do overseas Android app launches.
Google could also cross-sell developers on its mobile ad services. Though many of its core services remain blocked in China, Google still does a fair amount of business selling ads in the country through its ad networks. It could both pitch developers on monetizing their apps using its AdMob mobile ad network, and on promoting their apps via AdMob, Google Play and (for apps available overseas) Google Search.
Google would face no shortage of local app store competition. Chinese search giant Baidu (BIDU) and messaging/gaming giant Tencent each have high-profile Android app stores, as do Qihoo 360 and smartphone maker Xiaomi. Several other phone vendors also offer app stores that they pre-install on their devices.
But between the company's own apps and services, its ties with Chinese developers that have done overseas app launches and the near-ubiquitous support Google Play has among big developers outside of China, Google still has the means to make its presence felt. And it certainly has a lot of incentives to do so.
