Google looks for answers to Chinese market

Beijing: Google Inc has endured the ire of the Chinese censorship machine. In its nine years in China, it has been slowed down, shut down and accused of peddling smut.

The Mountain View, California, search engine also has been humbled by its main Chinese rival, homegrown Baidu Inc, which enjoys double the market share and has long been suspected of receiving preferential treatment from the government.

Now, with the resignation of its popular chief of China operations, Kai-Fu Lee, Google appears to have taken another punch to the chin in its quest to win over the world's largest internet market.

Lee stepped down from his post early this month to launch a $115 million (Dh422.5 million) fund to finance Chinese tech start-ups.

On the surface, Google's squabbles with Chinese authorities appear to be the company's primary challenge. Over the years, service has been intermittently stopped and delayed by the government. This despite Google's agreement to block politically sensitive sites, a move criticised by free-speech advocates.

And although Google, a leader in innovation, may be the search engine of choice for China's elite, two-thirds of the country's 340 million internet users are young and are not college-educated. Many of them are drawn to Baidu's easy access to pirated songs and online message forums. Google offers neither.

"It's not that Baidu is doing a better job than Google with products; some are actually worse," said Edward Yu, chief executive officer of Analysys International, a Beijing tech consulting company. "The problem is brand awareness. People don't know Google. They don't even know how to pronounce it."

Google renamed its Chinese site GuGe three years ago because people here struggled to pronounce and spell its name. But even that has failed to resonate as many Chinese choose to address the search engine with the moniker GoGo. Internet users have to type just G.cn in the URL to access Google's Chinese site.

Analysts say one reason Lee was resolved to leave his post at Google was because of disagreements with the American headquarters over marketing strategies in China. They say it was hard for Western officials to comprehend the complexities of the Chinese market, coming as they do from an area of the world where Google already is dominant.

"Google never seemed to drive brand awareness," said David Wolf, president of the Beijing tech and media advisory company Wolf Group Asia Ltd. "Let's face it, it grew most places by word-of-mouth. It's never had to build a marketing operation. Here, it's entirely different."

John Pinette, a Google spokesman in Hong Kong, said promoting the company's products was one of the biggest challenges in China but hinted that more aggressive marketing was on the way.

"People associate us with foreign searches and English-language searches," Pinette said. "It's up to us to present Google to university students or other people [in China] as a relevant and interesting place to go."

Google got a head start in China, introducing a Chinese-language version of its search engine in 2000. Baidu launched the following year. But Google waited until 2006 to open an operation in China. That gave Baidu time to build its organisation, ramp up its sales force and snatch advertising from Google.

Baidu is a "faster and more nimble competitor," Pinette said.

Google said this month that it would double the size of its sales team in China, although Pinette declined to say to how much. Google marketing teams are travelling to 25 Chinese cities trying to promote its services to small companies.

Despite claims that Baidu blurs the line between search results and paid advertisers, the domestic search engine has dominated the marketing and public-relations front.

"Baidu has played the local card very well," Wolf said. "The perception is, it services Chinese needs better."

Several years ago, a Baidu video advertisement depicted a Chinese man in Ming Dynasty garb using wordplay to batter a Western man speaking poor Mandarin. The message: Google doesn't speak Chinese. Baidu does.

"I only use GoGo to find foreign websites," said Ye Zhihui, a 28-year-old computer programmer in central Henan province. "If I need anything in Chinese, I use Baidu."

The Chinese company boasts a 61.6 per cent share of the search market's revenue, compared with Google's 29.1 per cent, according to Analysys International. Yahoo stands at 5.6 per cent.

Although the immediate outlook for Google appears lacklustre here, experts say the company has been positioning itself to challenge Baidu in two areas: cell-phone services and licensed music.

China's biggest cell-phone service provider, China Mobile, is unveiling a series of handsets equipped with the Google Android operating system. Google also has been advertising the use of Google maps on cell phones.

Although the market for online advertising on cell phones remains in its infancy in China, the volume of internet search engine usage on handsets grew 120 per cent in the past 12 months, Analysys International said.

Google and Baidu each control about a quarter of the mobile search market, but Google is expected to see a boost with the introduction of China Mobile's new third-generation technology.

China has 700 million mobile phone users and, unlike the US, many of them use their handsets as a primary gateway to the internet because they can't afford personal computers.

On the music front, Google maintains a partnership with leading music labels to offer free downloads through a third-party site, Top100.cn. The feature is exclusive to China.

It also puts Google squarely on the legal side of the music matter. On the other side, Baidu has been sued by record labels for providing links to pirated or unlicensed songs. The service is one of Baidu's most popular features.

But in a move that could serve as a major blow to Baidu, China's Ministry of Culture said last month that providers of online music would have to begin supplying copyrights to songs.

Mobile phones and music may help Google in the long run, but analysts say the loss of Lee will sting. The 47-year-old Taiwanese native is considered a visionary and has forged a large following with the success of his self-help book Be Your Personal Best.

"He's charismatic and beloved by young people in China," said Kaiser Kuo, a Beijing-based writer and local internet expert. "He handled his personal brand so extremely well. Those are mighty big shoes to fill."

In his place, Google has selected two in-house executives: Boon-Lock Yeo to oversee engineering, and John Liu to head sales.

In recent days, Lee has used his blog to dismiss rumours about why he left - from charges that he was being investigated for tax evasion to word that Google was leaving China.

He also said he delayed his departure from Google to address the government's complaints that pornography was slipping past the search engine's filters. Lee said the scrutiny was not the reason he resigned to start his venture capital company, Innovation Works.