Who Has the Best Maps in China: Google or Baidu?
Everyone loves Google Maps... except China.
Google seems to have locked down the U.S. mapping market; Google Maps won the distinction of being App Store's No. 1 free app just seven hours after its reintroduction. Unfortunately, Chinese users have never had the chance to enjoy Google Maps fully because of the Chinese government, and they may not in the future, either. Recently, several Chinese competitors have knocked Google to the side.
Of the companies battling it out, Autonavi and Baidu are winning. And soon, one of them may lay claim to data on more than 390 million mobile users' locations -- and the billions of ad dollars that will follow.
Google Maps' decline
Google in China is a heartbreaking story. Although the company's Android system commands 90% of China's mobile operating system market, all of the tech giant's other services have slumped. In the past year, the company has lost significant ground in shopping, music, search, and now maps. In less than two years, Google Maps went from dominating the market with a 46% share, to sixth place with 9%. The reason? Government and competition.
Perhaps the biggest reason for the decline was Google's move out of China and into Hong Kong in 2010. Despite its efforts to avoid governmental pressure, Google still has to work through Great Chinese Firewall. As a result, Chinese users experienced a slowdown in Google services, including Maps.
Even more unfortunate, the government has censored a portion of the Google Maps website.
As the government keeps Google's services down, competition has pounced at the mapping opportunity. Chinese companies continue to create customized versions of Google's Android OS, and Google Maps is no longer pre-installed on all of China's Android-based smartphones.
Other foreign companies have also had a rough time. Over the past quarter, Nokia's Ovi maps dropped from 7.3% to 5.1% market share. And as Sohu , Baidu, and Autonavipull ahead, it's clear that the companies that make it in China must be Chinese.
Why Autonavi is No. 1
Two years ago, Autonavi trailed Google Maps. Now the tables are turned.
Beyond Google's legal woes in China, Autonavi solidified its position by developing key partnerships. While Apple partnered with TomTom to deliver on its U.S. maps product, TomTom didn't have the required license to operate in China. So, Apple tapped Autonavi.
And in late November, antivirus software maker (turned search engine) Qihoo 360 asked Autonavi to provide it with maps, too.
Although it's not technically a partnership, Autonavi has already developed a Windows 8 app ready for use in China as well.
So far, the company's partnership moves are paying off. Autonavi has seen steady margin increases over the years, with a significant jump in gross and net margin from 2010 to 2011. Now that Autonavi reigns in China's maps space, it's not unreasonable to think that the company will post another blowout fiscal year.
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Don't count Baidu out
Besides Autonavi's partnerships, there seems to be little unique about its maps product. Yes, it provides public transport routes and local listing information -- but Baidu Maps does that and more.
Back in 2011, Baidu released indoor maps with more than 500 participating malls. (The only other competitor that has indoor maps is Google.) And in September, Baidu better integrated Maps to other services, including built-in discount vouchers, a revamped voice navigation system, and real-time traffic information.
Though it hasn't struck any partnerships, Baidu has made its Maps available for Android, iPhone, Windows Phone, and Symbian. That proliferation suggests that Autonavi better watch out -- Baidu is growing slowly, but surely.
Mapping China in the 21st century
Google Maps' (and Nokia's Ovi Maps) demise in China is a telling tale. Only Chinese companies seem capable of navigating the country's regulated map market.
As a stand-alone navigation company, Autonavi is a pure play for anyone interested in the mapping marketplace. Right now, the Chinese tech industry is still nascent as the big names battle it out over other key verticals -- games, video, social media, etc. If you think China's tech industry will remain fragmented, then Autonavi -- with its partnerships -- might be a great investment.
Still, I think Baidu is the 800-pound gorilla in China's tech industry. Because of its scale, Baidu can devote more resources -- as it has -- to its Maps product. Moreover, the ecosystem Baidu is building out will make its maps more valuable to users as they continue to switch from desktop to mobile. To keep up to date with Baidu's evolving product strategy, you should check out our brand-new premium report. In it, The Motley Fool team has broken down Baidu's opportunities for huge profits. To access it, click here now.
The article Who Has the Best Maps in China: Google or Baidu? originally appeared on Fool.com.Fool contributor Kevin Chen has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Baidu, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Baidu, Google, Microsoft, and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.