Google, Baidu do battle in China's 3G frontier
By Sherman So
HONG KONG - Google, whose Internet search engine has struggled in China to
replicate its market dominance elsewhere in the world, is bringing all the
firepower it can to overwhelm local rival Baidu in the vast new frontier of
Chinese third-generation mobile-phone Internet search.
China didn't introduce 3G mobile-phone technology until the start of this year,
and companies such as Baidu and US-based Google are looking to cash in as the
world's biggest mobile phone market switches to the faster technology.
China had more than 695 million mobile users at the end of June, according to
the Ministry of Industry and Information Technology.
"As 3G starts in China, mobile Internet will be an explosive
opportunity," said Lee Kaifu, president of Google Greater China. That applies
across the spectrum of those involved in the business - from phone makers to
application developers, to service providers. "For example, Beijing is often
choked with traffic. For people who are driving, a real-time traffic map of the
city available on mobile phone will be very useful."
Lee envisions a day when more people will be using cellphones than computers to
go online in China. At the end of June, about half of the 338 million Internet
users in China, or 155 million, have been surfing the net with their phones,
said researcher China Internet Network Information Center.
"Right now, the Internet traffic from mobile phones is about one-twentieth of
that from computers in China. But mobile Internet traffic can catch up quickly
once the infrastructure is ready," said Lee.
That was certainly the case in Japan, where the amount of Internet traffic
generated by cellphones is almost the same as that generated by PCs in Japan,
which has been running 3G mobile services since 2001. An estimated 82.55
million people in the country surf the net with their PCs, while 75.06 million
access it from cellphones, according to the country's Internal Affairs and
Communications Ministry.
Supporting mobile Internet has been an important goal for Google, which
launched the Android program late last year to make Internet-ready phones
easier to produce. In China, Google has been working on mobile applications
since 2007.
"In 2007, we started two major non-search development programs: mobile and
map," said Lee. It signed a deal with China Mobile, which serves more than 70%
of the country's cellphone users, to be its mobile search partner.
Location-based applications is one key focus. "Google has an application called
Latitude. It shows the location of a user's friends so that the user can
message them to arrange a get-together, say. This kind of application will be
more useful in a mobile device whose location is changing as a person travels
than in a PC, whose location is fixed," Lee said.
Other applications use information in the mobile phone to determine the user's
location and show restaurants, cinemas and other nearby points of interest.
Google also plans to transform its existing PC applications to mobile, said a
Google engineer, Han Ping. More innovations are expected to come from the
company's US headquarters and be adapted to the China market. "For example,
offering a barcode scanner in mobile phones," said Han.
To further facilitate its mobile push, Google China early last year hired as
its head of sales John Liu, who comes from a telecom background.
Liu served for six years as chief executive officer of SK Telecom China, a unit
of the largest mobile operator in South Korea. Before that he held senior
executive positions at Singapore Telecom. During his tenure, SK Telecom bought
a 6.6% stake in mobile operator China Unicom, becoming its second-largest
shareholder. SK Telecom also became one of first foreign firms to participate
in the development of TD-SCDMA, China's very own 3G technology.
Google's determination to profit from the expected surge in 3G mobile Internet
use is demonstrated by its recent move to promote its mobile service (g.cn)
with advertisements in the Beijing subway, a break from its previous "no-ad"
approach. Still, it will face a fight from rival Baidu, which also believes in
the potential of the mobile search market.
"In many ways, mobile Internet is a compliment to PC-based Internet for users,"
said Amella Wei, senior manager of Baidu, responsible for its wireless business
development initiatives. "As the pace of people's lives continues to pick up,
as we increasingly rely on mobile devices to find the information we need, we
think mobile search will become a natural application that Internet users will
turn to while on the go."
Baidu expects that apart from search, users will be interested in social
networking applications and location-based services on their phones, and has
been strengthening the upper echelons of its staff since last year to meet the
challenge.
Baidu technology chief Li Yinan is a 16-year veteran of the industry who
previously was the chief telecom scientist at Huawei Technologies, the largest
telecom solutions provider in China, where he oversaw the development of 3G
cellphone chipsets. Operations chief Ye Peng was previously general manager of
Apple China and before that managing director of SatCom AG and a vice president
of Motorola Mobile Business North Asia.
Even so, Baidu has been slow to put its mobile initiatives into action.
Only in May did it sign up China Telecom, the smallest of the three mobile
operators in China, to be its mobile search partner. It makes its most popular
applications on PC, such as Baidu Knows, Baidu Post Bar and MP3 search,
available in China Telecom's 3G platform but has not yet developed new
applications specific for mobile use.
"The wireless market is still in its nascent stage. We hope to continue
strategically partnering with both carriers and handset manufacturers to help
develop the market," said Wei.
The company has also partnered with handset makers, such as Samsung, Lenovo,
Nokia and Motorola. "So far, one of the things we have been doing is
pre-installing a search box in the handsets, so when users go online with their
mobile phones they will automatically have a Baidu search platform to access
for their searches," said Wei.
Baidu's late start in mobile development could provide an opportunity for
Google to narrow its gap with Baidu in China market.
At the end of last year, Baidu had 60% of the overall search engine market in
China, compared with 30% of Google, according to Beijing based researcher,
Analysys International. The two are more evenly matched in the mobile search
sector, where Baidu had 29% of the market, against Google's 27%.
On the surface, Google appears better placed to overtake Baidu, but industry
insiders doubt whether Google's mobile applications will prove as popular as it
hopes. The applications may be too sophisticated for the broad Chinese public,
said Jay Chang, chief financial officer of Kongzhong, a leading mobile data
service provider in China.
"In our experience, cellphone users are generally more low end than people who
use the PC to access the Internet. They prefer entertainment and simple
applications," In Chang's view, the ideal mobile Internet applications are
multiple-player games and novel downloads.
Jacky Huang, research manager, digital marketplace research at IDC China, said,
"While the search engine is the core of PC-based Internet, it is hard to
predict what will be the core for mobile Internet. Besides, the carriers and
handset manufacturers also have a lot of power in shaping what would be popular
in mobile Internet. Just look at Apple's iPhone. To many users, it defines
their mobile Internet experience - there are lots of uncertainties in mobile
Internet development."
In China, the most popular mobile Internet application at the moment belongs to
neither Google nor Baidu, but Tencent, which operates the country's most
popular online chat platform, QQ.
And for all their deep wallets and strong firepower, neither Baidu nor Google
is the most popular in China when one considers only mobile search, where
relative small fry Shenzhen-based Easou led the field with a 34% market share
in 2008, according to Analysys International.
Frank
Wang founded Easou in 2005. "We designed
Easou specifically for mobile use right from the
start, giving it an edge over Baidu or Google,
which are based on what worked in PC," said
Wang.
Besides a search box, Easou provides a simple directory offering users
information they typically want, such as weather, nearby restaurants, whether
the user is in Shenzhen or Shanghai.
Without partnerships with carriers, Easou spread among mobile users by word of
mouth. It says it has six million visitors a day, and to meet growing demand
expects to increase staff levels to 1,000 next year, from the present 600.
In a strong vote of confidence that Easou can continue to head off its vastly
larger rivals, the company's backers agreed to pump in $12 million in
a third round of financing last November. The Shenzhen startup has now
raised US$17 million in total from investors including AXA Private Equity and
ID TechVentures. That is easily dwarfed by Baidu's second-quarter net income of
$56.1 million, but it appears for now that Easou's focus gives it the leverage
to lead at least this part of the search world.
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