American tech companies such as Amazon, Facebook, and Google have small fractions of market share in China compared with state-backed Chinese e-commerce and social media giants.
By Rob Marvin
This week has been a stark reminder of the power the Chinese economy wields over American companies, from Apple and Google to the NBA. US corporations’ access to the Chinese market comes at a cost, as companies are forced time and again to cede control or forego free speech on issues such as the Hong Kong pro-democracy protests, in order to appease the Chinese government.
Particularly concerning US tech companies, their bottom lines and profit margins need China a lot more than China needs them. According to data aggregated by Statista, American tech giants’ market share in China pales in comparison to state-backed Chinese firms.
Google enjoys a more than 88 percent market share in the US, but in China, the search juggernaut sits at 3.2 percent, whereas Chinese tech conglomerate Baidu has a 76.7 percent market share. Doomed projects such as Dragonfly, Google’s attempt to build a censored search engine for China, stem from the desire to gain a stronger foothold in the biggest consumer tech market in the world.
Facebook, which has been blocked on and off by the Chinese government for the past decade, also built a censorship tool for the Chinese government. While Facebook is still officially banned in China (though not in Hong Kong and Macau), Statista estimates it still has around 2.9 million Chinese users. But WeChat, China’s ubiquitous social-media messaging app, has over 1.1 billion users.
Sometimes, US companies simply cut their losses. Uber finally gave up its costly battle with Chinese ride-hailing competitor Didi Chuxing in 2016 with a merger, and Amazon-which has a 0.5 percent market share in China compared with the dominance of Alibaba’s Tmall, AliExpress, and others-decided to shut down its Chinese marketplace earlier this year.
It’s prohibitively difficult, expensive, and volatile for outside companies to compete with Chinese corporations on their own turf. Even for the few that do manage to carve out market share, is it worth the effort?
Originally published at https://www.pcmag.com on October 11, 2019.