Google steps up fight for the China market

[HenryTo]

The search war is now intensifying in China as well. This can only be good for us consumers.
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Google steps up fight for the China market
Wed May 11, 2005 06:18 AM ET
(Adds new Microsoft China ventures in grafs 16-17)
By Doug Young

SHANGHAI, May 11 (Reuters) - Web services leader Google Inc. (GOOG.O: Quote, Profile, Research) has won a licence to operate in China and has bought a Web address as it battles Yahoo Inc. (YHOO.O: Quote, Profile, Research) in the world's second-largest Internet market.

The U.S. Web services giant, which makes its money from searches, advertising and other services, is hiring staff with the aim of opening an office in the country this year, according to several sources within or close to the company.

A person familiar with the matter told Reuters the company was planning to open an office by the end of this year, most likely in Shanghai, and was building up a country team to target corporate customers for advertising sales.

A Google spokeswoman had no comment on those matters.

China claims the world's second-largest number of Internet users after the United States and had 94 million Web surfers at the end of last year. The figure is expected to grow to 134 million by the end of 2005, according to official data.

But major players must cope with rampant censorship in China. Most firms voluntarily block searches on sensitive topics from the Falun Gong spiritual movement to the June 4, 1989, crackdown on pro-democracy protesters in Tiananmen Square.

Google itself fell victim to a periodic blocking of some Web sites in 2002, when people who tried to access the Chinese language site were routed to an array of other similar sites.

"Google is interested in China and we are working to learn more about this important market," the spokeswoman said in a statement sent to Reuters, the company's first public comments about its China plans.

"As part of our studying and learning about this market, we have obtained a licence for a rep office, but have no employees in China at this time."

Google currently has two job vacancies posted under the China section of its Web site, including a marketing communications manager and a marketing director.

Google last year purchased a small stake in China's leading search engine, Baidu.com, which is now in the process of pursuing an overseas listing. Google has not commented on the strategy behind the purchase.

Google may be hoping an expansion into China can help it sustain its rapid growth pace, reflected by a near-sixfold rise in first-quarter profit that was announced last month. Its stock has leapt nearly 170 percent since an initial public offering in August 2004.

SURF'S UP

China's online search market was worth an estimated 1.25 billion yuan ($150 million) last year, up 81 percent from 2003, according to Shanghai iResearch.

But competition is intensifying. Baidu led the market with a 36.3 percent share, followed by Yahoo with 22.7 percent and Google with 21.2 percent.

Last week, another major local Internet player, Sina Corp. (SINA.O: Quote, Profile, Research) , said it had completed work on a self-developed search engine and was testing the technology and expected a full launch of the product later this quarter.

Other rivals include Nasdaq-listed Sohu.com Inc. (SOHU.O: Quote, Profile, Research) , whose name means "search fox" in Chinese. Software giant Microsoft Corp.'s (MSFT.O: Quote, Profile, Research) MSN network also operates a search engine at its China site, china.msn.com.

On Wednesday, Microsoft also announced two new ventures designed to transform its limited MSN presence in China into "the full gamut of (what) a true Internet portal should be," a company official said.

Both of Microsoft's new ventures involved relatively unknown Chinese players, with one venture centred on the company's more traditional MSN Web-based services and the other on services for mobile phones.

Google's popularity in China has come even though the company has no physical presence in the country. Instead, users who go to Google's main site at www.google.com can choose to be directed to a China-specific site.

The spokeswoman confirmed that Google had recently acquired a China-specific Web address (www.google.com.cn), reflecting a strategy of operating country-specific sites based on Web addresses within each region.

She declined to comment on Google's plans for the .cn site, but visitors to the address are now redirected to the Chinese language site at the main www.google.com address.

(Additional reporting by Wei Gu in New York and Lisa Baertlein in San Francisco)