ROCKY ROAD: Osama Bedier, vice-president of mobile for Google, speaks during the Web 2.0 Expo in San Francisco last Wednesday . Google said it was in talks with China about plans for an online map service, as Chinese regulators prepare to force unlicensed operators to withdraw mapping products. Picture: BLOOMBERG

Google forced to make another plan in China

A major Chinese portal announces it would no longer use Google for search, compounding its rapid loss of market share

JOE McDONALD

Published: 2011/04/04 07:22:42 AM

A YEAR after a public row with Beijing over censorship, Google says its business with Chinese advertisers is growing even as the internet giant’s share of online searches in China plunges.


A major Chinese portal announced last week it would no longer use Google for search, compounding its rapid loss of market share since March last year when it closed its local search engine.


The future of a Google map service that is a key part of its remaining appeal in China is in doubt.


Google’s main presence in China has become its advertising sales offices, an unusual situation for a company that dominates the internet elsewhere.


Google risked being completely shut out of China after it angered Beijing by announcing last January it no longer wanted to comply with web censorship. It dodged that fate, but without a flagship local online presence analysts say Google will fall further behind local industry leader Baidu as a search provider, while the controversy makes it hard to line up Chinese partners for other ventures.


"Chinese companies will think twice before they can have any kind of relationship with Google," said Edward Yu, president of Analysys International, a research firm in Beijing.


Google says it sees its biggest opportunities in China in selling advertising on behalf of local websites or to companies that want to reach customers abroad through its global sites.


Google was allowed to keep advertising sales offices in China. Beijing had an incentive to let those stay, because they benefit local websites and advertisers.


"Google’s revenue in China has grown year on year," said a company spokeswoman, Jessica Powell. "Our business in China is doing well. We have hundreds of partners — large and small who we continue to work with."


Yet its relationship with Beijing is chilly. After Chinese authorities stepped up web censorship following pro-democracy protests in the Middle East, Google said last month the government was obstructing access to its Gmail e-mail service and trying to make the blockage look like a technical problem. The government denied the accusation.


This week, the government newspaper Economic Daily said three Google units that deal with research and development, customer support and advertising were under investigation for possible tax offences. State media played up the report and one newspaper called the company "Brother Trouble," a play on its Chinese name. Google said. "We believe we are, and always have been, in full compliance with Chinese tax law."


Mainland users can reach Google’s Chinese-language site in Hong Kong, a self-governing Chinese territory without web censorship. That comes with a big drawback: Beijing’s filters can make access sluggish, reducing the site’s appeal in China, which has more than 450- million people online.


Google does not break out sales by country, but Analysys estimated last year’s China revenue at 2,6-billion yuan ($409m) — or less than 1,5% of Google’s global revenues of $29,3bn.


Last year’s dispute testified to the complex internet landscape in China, which promotes web use for business and education but has strict controls on content and blocks social media sites including YouTube, Facebook and Twitter.




Google’s share of China’s search traffic fell to 19,6% in the final quarter of last year from 30,9% in the first quarter, according to Analysys. It said Baidu’s share rose to 75%. Sapa-AP