BEIJING - Three years ago this autumn,
students and office workers around China were
cursing out loud because their favorite online
research tool was blocked. Google, though it had
no physical presence in China, had already made a
name for itself in the People's Republic with its
speedy search engine index of 4.3 billion Internet
sites, useful for overseas news, travel planning
and data for academic papers.
The Public
Security Ministry's block on Google ended in about
two weeks, apparently because the ministry began
using packet filters to stop direct links to
controversial search result sites, and because
Google agreed to disable its cache function in
China. With packet filters and without the cache
function, for example,
users may
see a search result that says "evil Jiang Zemin"
but cannot link to the page.
Things have
changed radically. Last year Google bought a
minority stake in the Chinese search engine
Baidu.com. In June 2004, Google launched
Chinese-English translation, China weather reports
and China people-tracking services. A month later,
the company said it would offer search engine
technical expertise to Netease, a major Chinese
Internet portal, as part of a long-term
cooperation agreement. Locator maps launched this
year at bendi.google.com specifically target the
China market, and Chinese users can also get
Google's downloads and free email.
Last
month, the company took the first steps toward a
China research and development center and hired
Lee Kaifu, a former Microsoft corporate vice
president, to head it. The R&D center, to be
established between Beijing and Shanghai with 50
Chinese college graduates, will "strengthen
Google's efforts in delivering the best search
experience to our users and partners," the
statement said. Lee will also be president of the
seven-year-old company's growing China operations,
Google said in a statement. Spokespersons at
Google's headquarters in Mountain View,
California, declined three requests to discuss
their China strategy for this article. But
analysts say the strategy is clear: the company
intends to leverage its name to form a low-profile
company in China, that will compete with
Microsoft, Yahoo and major Chinese Internet firms
for online advertising and paid search income in a
country where the Internet industry is expanding
along with the overall economy.
"Advertising dollars," said Danny
Levinson, managing partner of Beijing-based BDL
Media online services firm. "They must localize in
order to take advantage of getting into the cash
business of getting those ad dollars." Google is
gathering information on China to attract
multinational companies that can pay for searches,
said Duncan Clark, managing partner with the
Beijing consulting firm BDA China Ltd. China
Mobile and third-party mobile data providers may
work with Google to do mobile searches, he said.
Advertising revenue will come from banner ads on
the right side of Google search results for
strings such as "China hotels" and possibly from
offline advertising, says Morgan Stanley internet
analyst Mary Meeker.
The tense competition
between Microsoft and Google has become obvious
lately. Microsoft sued Google and Lee Kaifu in the
United States for an alleged breach of a
non-competition agreement between Microsoft and
Lee. A court has allowed Lee to work for Google
but not on any projects similar to his Microsoft
jobs. Microsoft has run a China R&D center,
Microsoft Research Asia, for seven years. Because
of their localized indices and contacts with small
or mid-sized businesses who need paid searches or
advertising, Chinese competitors such as Baidu and
Sohu, which is also an Internet portal, have an
edge over Google in China, analysts say.
Baidu's search engine leads Google by a
small margin in major Chinese cities, the CNET
technology news website reported in August. Baidu
would not comment on its relationship with Google,
which does not have a Baidu board seat despite its
investment. "We feel that it would be
inappropriate for us to comment on how we see
Google," said Baidu investor relations manager
Cynthia He.
Apart from a China
representative office, Google still has limited
physical presence in the country. The company's
official office locator map shows nothing for
China. "Google hasn't shown its cards yet on what
it's doing in China," Meeker has said. "But the
challenge for Google in China is to be more local,
to build more community."
Clark of BDA
China says Google hopes to set up a wholly owned
foreign enterprise in China. He said a
long-standing recognition among common Chinese
Internet users, who number about 94 million, puts
Google ahead of competitors with more presence in
China. "They have huge amounts of brand
recognition," he said. "They don't really need to
do too much PR. They were here before they were
here."
Ralph Jennings is a
Beijing-based foreign correspondent.
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