Google’s Uphill Battle in China

While Google is considered too powerful in the United States – with “an online package of news, entertainment, blogs, and services drawn from all the world’s up-to-the-minute knowledge,” it is not in China.

According to iResearch, Google’s market share in China was only under 15%, down from about 25% earlier last year. Baidu, the Chinese search engine, has more than 69% of market share in China’s search-engine market. No double Baidu has an upper hand against Google in China because it has a deep understanding of Chinese users and their complex languages.

Most multinational companies found the China market is hard to crack. It took long time for multinationals to learn how to do business in China. The worst defeat was eBay – it shut down its China site last December and took a back seat in Tom Online, a Beijing based Internet portal that provides wireless value-added services with no experience in online auction business. Yahoo! had been in China for seven years. It finally threw itself to Alibaba, a local e-commerce company.

However, Google is not giving up. Recently, Google is joining China Mobile to launch a mobile-search-engine business. With more than 400 million cell phone users, China is the world’s largest cellphone market. Many industry observers are betting on the fact that Google is being favored among the business professionals – “in terms of future business development, Google does have a good base in China to grow on.”

The mobile search is critical for a country that has more than 400 million mobile phone users. But I don’t see why Baidu is not doing the same. In addition, how Alibaba comes to play a role in the search engine race is not clear. Google is definitely facing an uphill battle in China.

The Crown Jewel of the Internet

“Search is the crown jewel of the Chinese Internet market.” Thus came China’s search engine war, fueled by the outpouring money from foreign investors and the overwhelming number of competitors in the market.

Shortly after Baidu’s phenomenal IPO last August, , managing director of Draper Fisher Jurvetson, which invested $10 million for 28 percent stake in Baidu, said: “the war is already over, Baidu owns the market.”

Well, maybe not yet. Recent survey results by Keynote Systems, an Internet performance authority, show that Chinese users prefer Google to Baidu. According to Keynote, Google won the highest user ratings in 11 of 13 categories including general search, news search and image search, while Baidu came first only in music search.

This shouldn’t be a surprise. Even at Baidu’s IPO frenzy, CNNIC data revealed Google beats Baidu in traffic share for individuals 25 years old and up with higher education. People who use tend to be professionals with higher income, and they use Google to search for information and knowledge. On the other hand, the majority of people who use as their primary search engine use it to search for downloadable music.

In my , I talked about local players having an upper hand against their global counterparts because of their intimate customer knowledge. So far, foreign Internet companies don’t have a good record of success in China. Yahoo!, for example, entered the market early and bled money for years, but couldn’t overtake the dominant Chinese portals.

There are certainly plenty of reasons that Google may be humbled in the China Internet market.

“History has shown us again and again,” Sohu’s CEO Charles Zhang said bluntly, “just like Yahoo! failed, Google will fail. I don’t worry about Google – it’s not even on my radar screen. To us, it’s only Baidu.”

History may or may not repeat itself. I bet Google is on Charles Zhang’s radar screen now. The competitive landscape is changing quickly. Who will be the final winner of the crown jewel of the Chinese Internet market still remains to be seen.

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