Google's Android Phones In China Could Become Google-less

As ironic as it sounds, Baidu - China's number one search engine is negotiating with smartphone manufacturers to pull the ultimate coup - replace Google Search with Baidu Search on all Google Android phones in the country.

Robin Li, Baidu's founder and CEO is focused on winning this 'default search' battle where "a (Baidu) search box will be prominently displayed on the Android cell phone's display screen. This came on the heels of Baidu announcing they want to develop their own operating system for mobile phones.

UPDATE: July 29 - This report has since been denied by Kaiser Kuo, director of international communications  for Baidu. In an email addressed to me, Mr. Kuo stated, "We haven't made any announcements about a mobile OS that may or may not be in development. Just want to prevent this (rumor) from being spread (in the US) when it's inaccurate."

According to a Gigaom report "such a move would help Baidu steal away the brand identity and ad revenues from Google's own mobile plaform."  Since Google shares its revenues with handset makers like HTC, Motorola and Samsung,  the manufacturers are actually subsidized by Google to build Android smartphones. In order for Baidu to cut Google out of the picture, they would have to ante up as much of the revenue-share or better to get these companies to  feature Baidu versus Google search.

While the percentages in China work in Baidu's favor - Baidu at 63 percent market share versus Google's 36 percent - the actual number of Android phones manufactured in the country is very small. At a tiny 0.4 percent of the 7.25 million smartphones sold in China (during the last 3 months of 2009), one has to wonder why Baidu is waging this battle against Google at all?

According to a Wall Street Journal report, "Baidu wants to capture as much of this budding market as early as possible." My supposition however is that the government has something to do with this initiative.  Since Google's controversial stance about considering to pull out of China early this year - due to GMail censorship and hacking issues - the Chinese government has been less inclined to do business with Google on any level - no matter how small the impact.

Though basically unknown outside of its home country, Baidu is the dominant search engine in China and has been strengthening its market hold ever since Google shifted its China search service in March and began directing Chinese search users to its Hong Kong site (see previous post, "Google Under Threat of Going Dark in China If Government Pulls The Plug.")

In early July, Google has since been given the green light by Beijing to continue operating its Chinese search engine. "China has renewed our license," a Google spokeswoman told Reuters. "We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China."

A lot is at stake for Google. Number one - it loses credibility to have another search engine company steal its prominent "search" placement on its own phone and number two - it stands to have its small Chinese market share dwindle even more. Due to China’s large population, currently estimated at more than 1.3 billion people, Baidu’s 4.6 percent global search market share already rivals that of Microsoft’s 4.8 percent. And just under two-thirds of the Chinese have a cell phone, so Baidu wants to continue its search dominance as more Chinese consumers join the mobile web.

While Google reigns supreme in the States, its seems odd that its clout doesn't extend globally. But perhaps that is a good thing. World domination by any one company "gone unchecked" is not healthy for a free-market system. If Baidu is the one company in the world to pull this off, Google might just have to grin and bare seeing another search firm take top billing - for once - even it is on their own phones!