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     folder Google Steps Into China Ring for Yahoo Battle 
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people John Henry X from New York, USA

Member since
2004-05-20

Posts 83
Member Level
5: Entrepreneur

posted 2004-06-17 19:30:25

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/article/suggestToAdmin.jspBEIJING/HONG KONG - Google Inc's initial investment in China's biggest search engine firm sets the stage for a face-off with archrival Yahoo Inc in the world's second-biggest Internet market, analysts say.

U.S.-based Google, which has no physical presence in China, has dipped its toe into the market by buying a minority stake in Baidu.com Inc, which calls itself China's top search engine and has plans to make an initial public offering in New York.

"Google is a strategic investor but at this stage...it's a purely financial deal," Robin Li, 35, the Beijing-based firm's co-founder, told Reuters in an interview.

"There is still competition between the companies, but we do hope to work together in some aspects," said Li, a former Silicon Valley executive who met Google founders Larry Page and Sergey Brin in 1998 before they started their company.

Industry sources said at least eight Chinese and overseas investors, including Google and venture capital firms such as Draper Fisher Jurvetson ePlanet Ventures and Venture TDF, sank about $100 million into Baidu for a combined minority share.

Draper Fisher is betting heavily on China, with at least four other China-focused investments in its Asia portfolio.

China's Internet market is expected to grow to 111 million subscribers by the end of this year from 81 million a year ago, according to state data.

That would make the country second only to the U.S. market. According to a February Nielsen/NetRatings survey, more than nearly 200 million Americans had access to the Internet from home.

Google rival Yahoo beefed up its presence in the market with its purchase late last year of Chinese search firm 3721 Network Software for $120 million.

Yahoo China had no comment on Google's move, but some company executives said the investment clearly split the domestic online search market into the Google/Baidu and Yahoo/3721 camps.

Google must work with a Chinese partner to help it negotiate the nation's byzantine laws and complicated physical sales channels, analysts said.

PARTNERSHIP?

Chinese authorities briefly blocked access to Google in 2002 over concerns the search engine could be used by local web surfers to find information on banned topics such as the Tiananmen Square massacre and the Falung Gong sect.

As an early entrant into China's search-engine community, Baidu has a good understanding of the market, including the kind of self-censorship practised by many players over such sensitive topics, knowledge that is likely to give Google valuable insight, said DBS Vickers analyst Wallace Cheung.

"One of Google's major barriers is they do not follow some of the instructions or guidance from the Chinese government," Cheung said. "Baidu has a better understanding of the China market, and a better brand. For Google, this is just a test of the waters."

Google is most popular with wealthier, English-literate users in China, while Baidu does well among middle class users, said Henry Yang, manager of iResearch. Though Google has a Chinese interface, 3721's system is preferred by many non-English speakers.

Yahoo's 3721 had revenues of about 200 million yuan ($24 million) last year, compared to Baidu's 100 million yuan, Yang said, largely on the strength of the former's strong sales channel. ($1=8.276 Yuan)
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