Looking ahead after Google's partial withdrawal
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Even as global search engine giant Google looks to make profits in the Chinese mainland Internet market, its future looks grim, analysts and industry insiders said, one week after Google redirected mainland users to its Hong Kong site.
As an end to its two-month-long withdrawal drama, Google formally announced last week it had stopped censoring its Chinese-language search engine Google.cn and had rerouted traffic to the uncensored google.com.hk.
But Google said it intends to continue its research and development operations in the Chinese mainland and keep its sales staff.
Moreover, all of the five Chinese companies in Beijing and Shanghai Google has invested in are still in operation, and the company is keeping its partnership with mainland advertising agents for now.
Based on those facts, analysts believe Google does not want to give up the mainland market. It seems that Google wants to be the so-called 'human rights defender' to score political points while being a profit-hungry entrepreneur at the same time.
The question is: Can Google kill two birds with one stone? Well, most people say, "No."
Google enjoyed full market access since it entered the Chinese market in 2006. Last year, Google China's annual revenue reached 2.27 billion yuan (332.5 million U.S. dollars), a 50 percent increase year on year.
According to the Analysys International, a leading Chinese Internet consulting company, Google had more than 30 percent of the market at the end of last year, second only to home-grown giant Baidu, which had nearly 60 percent.
However, Google stock price has fallen by more than 20 U.S. dollars since the company's Jan. 12 threat, wiping billions of dollars off the company's market capitalization.
Meanwhile, Baidu's U.S. stock price has soared over 50 percent during the same period, adding billions to its market capitalization.
Google China's advertising revenues from the mainland market are expected to decline dramatically over time, while its partnerships with Chinese Internet companies are likely to be hampered.
Shang Wei, an IT company employee in Beijing, said his company dropped the idea of advertising on Google.cn since the dispute flared.
"There are too many uncertainties for Google now, and we have no desire to share that risk," Shang said.
Advertisers abandoning Google may turn to Baidu, or one of the other small- or medium-sized search companies.
China's Internet industry has expanded rapidly in recent years, with the number of Internet users topping 384 million by the end of 2009 -- that is nearly one third of China's total population and the largest number of netizens of any country in the world.
In reality, Google may have given up a golden opportunity. And, of course, China's Internet companies are all eyeing the vacancy left by Google.
Zhang Chaoyang, CEO of one of China's most popular Internet portals, Sohu, said in a report last week there is no need to worry about China's Internet search engine market just because Google has left.
Competition in China's Internet industry after 10 years of development is fierce, and Chinese Internet companies' ability to innovate is no less than their foreign counterparts, Zhang said.
According to Zhang, Sohu will strive to develop its home-grown search engine, Sogou, this year. (It currently has about 3.5 percent of the market.)
"It is still hard to say whether the search market will be dominated by Baidu or shared by a number of other ambitious companies in addition to Baidu," Zhang said.
Besides Baidu and Sogou, Microsoft's Bing, Tencent's Soso and Taobao's independent search engine are also contenders.
In summing up the Google drama, Zheng Yongnian, director of the East Asia Institute at the National University of Singapore, said in an exclusive interview with Xinhua Wednesday that localization should be one of the top principles of globalization.
"Multinational corporations operating in China should abide by local laws, as Chinese companies operating overseas do. It's a universal principle," Zheng said.
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