After winning permission from China\u2019s government to continue to operate in the country, Google Inc. must now fight for relevance as Baidu Inc. extends its dominance in the world\u2019s largest internet market. Uncertainty over whether Google would be forced out of China, prompted some advertisers to switch to Beijing-based Baidu. Google had its license renewed last week after it stopped automatically sending Chinese users offshore.
\n\u201cThere is a big gap between Baidu and Google, and that gap has got bigger,\u201d said Vincent Kobler, managing director of Emporio Leo Burnett, a Shanghai advertising agency that specializes in online marketing. \u201cIt\u2019s going to be tough for Google, even with the renewed license, to gain market share.\u201d<\/p>\n
Google\u2019s market share in China fell to 30.9 percent in the first quarter from 35.6 percent three months earlier, according to data from research firm Analysys International. Baidu\u2019s share increased to a record 64 percent from 58.4 percent, according to Analysys.<\/p>\n
\u201cIt won\u2019t be easy for Google because its service has been diminished in the past few months,\u201d said Jake Li, an Internet analyst at Guotai Junan Securities in Shenzhen. \u201cBaidu is likely to stay ahead.\u201d<\/p>\n
Last month, to remain in compliance with China\u2019s laws while also ending self-censorship, Google added an extra step for Chinese Web surfers, directing them to a landing page that in turn pointed them to the Hong Kong site. It then submitted a revised application to renew its license.<\/p>\n
Adding another complication for Chinese Web surfers will cost Google, Gene Munster, an analyst at Piper Jaffray Cos., said in a July 9 research note. Every extra step added to the search process will lose users, he said.<\/p>\n
Google always seeks to improve the quality of its service to users, spokeswoman Marsha Wang said. She declined to comment on the company\u2019s sales and market share in China.
\n\u201cOur position has always been the uncertainties surrounding Google have had no more than a marginal impact on our revenue, and I don\u2019t see any reason why this changes things,\u201d said Kaiser Kuo, Baidu\u2019s spokesman in Beijing.<\/p>\n
Google rose 2.4 percent to $467.49 on the Nasdaq Stock Market on July 9. The shares declined 25 percent this year, compared to a 73 percent gain by Baidu\u2019s stock.<\/p>\n
China had 384 million Internet users at the end of 2009, the government estimates, more than the U.S. population. That may grow to 840 million by 2013, according to EMarketer Inc.
\nGoogle began redirecting users in China to an unfiltered site in Hong Kong in March, a practice the country\u2019s government disapproved of. The U.S. company, based in Mountain View, California, said in January it would no longer comply with Chinese government requirements that websites self-censor content.<\/p>\n
Baidu in April said it benefited from Google\u2019s \u201csemi- exit.\u201d The Chinese company expects \u201chealthy\u201d growth in customers and average spending by clients will continue, Baidu CEO Robin Li said in a conference call in April.<\/p>\n
\u201cBaidu is willing to do whatever the government wants, to play by the rules. That\u2019s to Baidu\u2019s benefit,\u201d said Jason Helfstein, an analyst at Oppenheimer & Co. in New York. \u201cGoogle is trying to do things that they think are the right thing to do, even if it has negative business implications, naturally that has been shareholders\u2019 gripe.\u201d<\/p>\n
Ending self-censorship also cost Google partnerships with mobile phone service provider China Unicom (Hong Kong) Ltd. and Web portal Tom Online Inc.<\/p>\n
Google had said in January it would stop censoring content and threatened to exit the Chinese market after cyber attacks originating from the nation targeted its systems.<\/p>\n
The \u201chighly sophisticated\u201d attacks were aimed at obtaining proprietary information and personal data belonging to human-rights activists who use the company\u2019s Gmail e-mail service, it said.<\/p>\n
Bank of America Corp.\u2019s Merrill Lynch estimated in April Google would generate $160 million in sales this year from China. That\u2019s less than 1 percent of the company\u2019s projected revenue this year, according to the average of 29 analyst estimates compiled by Bloomberg. It earned sales of about $335 million from China in 2009, according to Analysys.<\/p>\n
Since it began redirecting Chinese users, Google\u2019s search results have been screened by China\u2019s so-called Great Firewall, a government monitoring system that blocks overseas services such as Facebook Inc. and Google\u2019s YouTube.<\/p>\n
The firewall limits Chinese Web users\u2019 access to information on topics ranging from Tibet\u2019s independence movement to the 1989 crackdown on protesters in Tiananmen Square.<\/p>\n
\u201cUntil Google develops a deeper understanding with regulators in China, Google\u2019s China business remains at risk,\u201d said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco.<\/p>\n","protected":false},"excerpt":{"rendered":"
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