Is the search giant's China-only music service the future of entertainment or a fast-growing money pit?
Google's Beijing branch has longed faced harsh criticism for its decision to censor search results at the behest of the Chinese government. But while Google China takes away content with one hand, it gives with the other: China's Google users are the only market in the world with access to a service that officially launched five months ago as Google Music Search, a platform that offers free, unlimited music downloads from practically every major label.
China, with its industry-decimating levels of piracy, has become Google's ( GOOG - news - people ) testing ground for an emerging music business model shared by start-ups like Spotify, Last.fm and Pandora--completely free, ad-supported music.
But is Google Music Search the vanguard of a lucrative new model or another YouTube, losing more money with every user it attracts? Forbes spoke with Lin Bin, the project lead for Google's music foray, about the possibility of offering Google Music Search outside China, the business success of his experiment so far, and whether Google Music Search on Chinese Android phones could create a kind of uber-iPod.
Forbes: It's rare that Google would launch a service like this in just one country, particularly a service as enticing as unlimited free music downloads. Have you gotten backlash from American users that you've offered this in China and not in the U.S.?
Lin Bin: Definitely. We've heard frequently from our users that they want this not just in the U.S., but in every country.
But the reason this works in China is the different nature of the market here. The reason we built this here is the really high piracy rate of music online in China. If you look at all the music services here, 99.9% are illegal downloads. Users search Baidu, and they can easily find anything they want. India and Russia also have a lot of piracy, but here, Baidu has a very large market share, and that means users barely have to try to get access to pirated music.
It's really hurting the music business in China, so the labels are searching for new models. If this experiment really works, they're happy to try in other countries. But for now, it's only going to be China.
So if piracy continues to increase around the world, would you expand this program to the U.S.?
That's really a question for the music labels. Our mission is to organize and make accessible the world's information. This is information that users really want, so we welcome it, but we don't want to do anything that would hurt the music industry, and providing a pirated music service is totally against our company culture.
How does the business deal behind Google Music Search work?
We made an investment into the company Top100.com. They've gone out and made deals with all the major labels and hundreds of indie labels. We just provide the search experience on top of this content: albums from Sony, BMG, EMI, Warner and over a hundred indie labels.
We place banner ads on the search page and the music player page, and all the revenue goes to Top100. Of course, we at Google know that the first step is to make the product really good and gather a lot of users before we ever try to make money. So today the ads are very small. In the next few months and quarters, we'll be focused on both improving the product and improving monetization.
Google is expected to launch an Android-based phone in China before the end of the year. Combined with Google Music Search, does Android in China represent a mobile device that can download or stream any song or album?
It's a nice idea, but the carriers have a unique business model in China. Much of their revenue comes from ringtones and ringback tones. China Mobile, for instance, sells packages that include phone time, SMS and a few songs you can download through their platform all together.
So of course we'd like to offer Google Music on Android Phones. But it's really a matter of whether the carriers would be willing to experiment. We wouldn't want to do anything to endanger the business models of our partners.
How well has Music Search's adoption gone so far?
We've only been doing this for less than six months, and we don't know that it will work. We haven't disclosed how many users we have so far. But one sign that it's working is that 30% of the users have never used Google before. So we believe this is a product that will bring a lot of new users to Google in China.
Given that Chinese users can access all the same music through Baidu's mp3 search, how will you change the habits of the millions of users who are already downloading music through Baidu?
That's a big question. The unfortunate fact is that to a lot of users, legal isn't enough to make a significant difference. So we've focused on building a product that has really good quality.
We're getting the download rate higher and higher, and we can only do that because the music is legal and we test the downloads ourselves. There are always a huge number of mp3 files that you download from other sites that have fake metadata designed to get users to download the wrong songs or with advertisements, and our downloads don't have that problem.
Finally, we have this system for understanding the DNA of songs. We also have acoustic analysis, the ability to do in-depth analysis of music parameters like pitches, tempo and beat. You can choose to move on the parameters all the way to the right, for instance, and find music that will have a beat that's very strong, and to the other extreme, find music that's very smooth and soft. So we add a lot to make the experience better.
So is Google Music Search intended to make money, or bring in more users at a loss? In some ways, it seems like YouTube: a popular service that costs more than it generates.
Google music is a very different product from YouTube. For one thing, everything on the service is high-quality and comes from our trusted music partners.
We of course want the service to both make money and bring in new users. If the product never makes money, then it can't continue to exist in the form that it does today, and we'll have to find a different business model.
Is it profitable today?
It's not, partly because we have very few ads. We're still focused on stage one: building a great product.
How long will you give the service to become profitable before you put more ads on it or make it a paid service?
I think maybe two years or as much as two-and-a-half years before it has to make a profit. We really want this to be a viable business. But if it's been around two years and the service is showing very significant growth, I'm sure everyone here would be supportive.
So if I Google users want to come to China and download unlimited free music, they'd be wise to do it in the next two years?
[Laughs] Hopefully, they'll have much longer than that.