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Local rival Baidu’s gain may be China’s loss if Google departs

Local rival Baidu’s gain may be China’s loss if Google departs
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First Published: Thu, Jan 14 2010. 08 56 PM IST

Waiting players: Users at a cyber cafe in Shanghai, China. Yahoo China and Microsoft also stand to gain if Google pulls out of China. Kevin Lee / Bloomberg
Waiting players: Users at a cyber cafe in Shanghai, China. Yahoo China and Microsoft also stand to gain if Google pulls out of China. Kevin Lee / Bloomberg
Updated: Thu, Jan 14 2010. 08 56 PM IST
Shanghai: If Google Inc. pulls out of China because of concerns over government controls, this country could be left with just one major Internet search engine: Baidu.com.
And while that could initially bolster the prospects of Baidu (pronounced by-doo), a home-grown company that is already dominant in the country, analysts say Google’s departure could also slow the overall development of the Internet in China.
Waiting players: Users at a cyber cafe in Shanghai, China. Yahoo China and Microsoft also stand to gain if Google pulls out of China. Kevin Lee / Bloomberg
“The whole industry will become worse,” said Yu Yang, chief executive of Analysys International, a Beijing research firm. “Without competition with Google, Baidu has no motivation to innovate”.
Analysts say Baidu established a leading position in the Chinese market through a combination of factors, including a keen understanding of local tastes and its willingness to cooperate with government censorship efforts.
Today, Baidu has about 300 million users, a market value of more than $15 billion (Rs68,250 crore), and 63% of Internet search revenue in China, nearly double the 33% share of Google, according to iResearch, a Chinese consulting firm. “It’s a duopoly in China,” said Richard Ji, an analyst at Morgan Stanley. “There’s just Baidu and Google. And Baidu’s way ahead.”
Some analysts said Google’s inability to catch Baidu was one reason the US company might have decided it was willing to give up on the China market.
Baidu was co-founded in 1999 by Robin Li, along with a young biochemist. The company was listed on Nasdaq in August 2005 at $27 a share. Li, 41, is now worth an estimated $3 billion, according to Forbes.
Google, meanwhile, dipped its toes in the Chinese market back in 2000, when it developed a Chinese-language interface for its main Google.com site. In 2004, it acquired a small stake in Baidu, which was then a tiny start-up.
In 2006, Google entered the market more directly by starting Google.cn, a search engine specifically built for Chinese users. At that time, Google agreed to censor Google.cn to screen out content that the Chinese government found objectionable, drawing criticism from some human rights groups. The company sold its $60 million stake in Baidu shortly thereafter. Despite its leading position in much of the world, it has had difficulty gaining ground on Baidu.
In China, Internet users are mostly young and searching for music and entertainment rather than information. Baidu created a shopping mall of Web offerings, many of them imitations of popular websites such as MySpace.
Baidu also dominates music downloads, often with links to websites that music companies say offer illegal downloads. Its strong relationship with the government contributed to its rise. “If the government wants something removed, it will do it immediately,” said Hong Bo, a consultant with Beijing consultancy 5G.
If Google follows through on its threat, analysts say Yahoo China, whose market share has plummeted since being sold to a local company called Alibaba.com Ltd, could gain market share. Microsoft, which ranks fifth by share of searches, as per comScore, could also seek to fill the void. But if other search companies do not step in, Chinese users could be seriously hurt, some Internet experts said.
“If Google really pulls out of China, for millions of citizens, they lose an excellent search engine and its relevant Internet services, like the Android mobile phone,” said Fang Xingdong, chief executive of Chinalabs.com, and the so-called father of the Chinese blog. “Chinese netizens are the biggest loser in this accident.”
©2010/The New York Times
Bao Beibei contributed to this story.
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First Published: Thu, Jan 14 2010. 08 56 PM IST
More Topics: Google | Baidu | China | Search Engine | Internet |