Is Google Partnering With Tencent for Its China Comeback?

It is safe to assume at this point that both Google and Facebook are prioritizing re-entry into the China market. There is also a growing amount of evidence to suggest that they are doing so with the assistance of Tencent, and possibly even Alibaba.

On Aug 1, The Intercept reported that Google has been planning to launch a version of its search engine in China that would comply with Chinese cybersecurity regulations.

According to The Intercept, leaked internal documents from the Silicon Valley search giant revealed that the project – code-named Dragonfly – has been underway since spring of last year, and accelerated following a December 2017 meeting between Google’s CEO Sundar Pichai and a top Chinese government official.

Earlier today, China Securities Daily reported that relevant Chinese government departments denied that Google was making such attempts. However, it is not uncommon for Chinese organizations and government spokespeople to deny factual reports. In fact, it is a common joke among journalists in China that there are few things more reliable in the Middle Kingdom than an explicitly denied rumor.
 

The Tencent connection

This is not the first time Google has attempted a China foray. Less than ten years ago, they were fairly dominant in China, but a series of disputes with government regulators over information regulation issues, along with a nasty cyber attack, led Google to largely abandon its ambitions within the PRC. Since then it has only maintained a minimal presence in the country but has made a number of attempts to re-establish itself there.

In its most recent push, there is reason to believe that they are doing so with the help of Chinese internet behemoth Tencent. While this is still speculative, the evidence is mounting quickly that suggests the two are growing closer:

• In January of this year, Google’s parent company Alphabet and Tencent announced a patent agreement that they stated would “pave the way for collaboration on technology in the future,” signaling a vision for a longer-term partnership looking forward.
• Google opened an office in Shenzhen in January as well. Shenzhen is home to Tencent’s headquarters.
• In June, Google announced a USD 550 million investment in JD.com, the Chinese e-commerce firm in which Tencent has invested, and with whom they have frequently partnered. It is assumed by many in the Chinese tech community that JD is one of the strongest and most loyal arms of “Team Tencent,” along with rising mobility star Meituan Dianping. When the JD investment was announced, Quartz’s Josh Horwitz also began to speculate as to Google joining the JD/Tencent alliance.
• In July, Google launched a WeChat Mini Program. Since WeChat is a Tencent platform, it marks another collaboration between Google and a Tencent-related entity.
• Just today, The Information reported that Google was also developing a news app for China. This is significant as well because China’s current most popular news app is Jinri Toutiao, owned by Bytedance, the Chinese super-unicorn who has feuded quite publicly with Tencent. Bytedance’s core strength is its content recommendation engine, an area where Google also excels. By teaming up with Google, Tencent could potentially be able to beat Bytedance at its own game.
• Finally, there is simply the fact that the two tech giants make very good strategic fits for each other. Google has long struggled with building social platforms, and Tencent is great at it. Tencent has struggled in search (they’ve invested in domestic engine Sogou, which is decent, but nothing near Google). As Tencent looks outward to craft its globalization strategy, they are likely to find no better partner than the company that singlehandedly manages much of the global internet.

What about Facebook and Alibaba?

Facebook – also blocked in China and like Google long looking for a way back in as well – may be aiming to pair up with a Chinese tech giant too. In July, the social media colossus registered a fully-funded subsidiary, only to have the registration taken down due to issues with China’s national-level regulators. What was interesting about the short-lived subsidiary was its location: Hangzhou, home to Tencent rival Alibaba.

While there is less of a history of partnership between the two firms, it does make sense. It would counter the moves of each of their biggest rivals, and meet the unique needs of each. Facebook needs an established partner in China that has earned the trust of the Chinese authorities. Alibaba, for all of its strengths, has had trouble making forays into social media, where Tencent has been strong. As Alibaba expands globally, partnering with a company that boasts billions of users around the world could certainly help their e-commerce and cloud service businesses.
 

We’ll have to wait and see

It is still far too early to know for sure if and how these alliances will work out, but there is no question that there is some flirtation going on here, and if Google and Facebook are serious about getting into China, it definitely makes sense. After all, as long as foreign companies have been operating in the People’s Republic of China, Chinese authorities have been most comfortable with their presence occurring in the form of joint ventures with local firms. We may be seeing the formation of a new model of such partnerships, but for the digital age.

What remains to be seen is if the DNA of these two very different cultures can co-exist. The operating principles of Google and Facebook have long been in stark contrast with those managing the Chinese internet. There will have to be some serious compromises of those principles from one side or the other. They may find a way to blend, or it may simply be a case of oil and water. Only time will tell.

Photo courtesy of TechNode