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Details of major developments for Google (ticker: GOOG) in China, and consequences for Internet search competitor Baidu.com:


Developments

  • Chinese authorities have approved Google's plans to open its first office in Mainland China.
  • Google has also started operations of www.google.com.cn.
  • 21st Century Business Herald reported that Google hired Victor Koo, the former COO of Sohu (ticker: SOHU) to head the company's Mainland operations.

Why the move to the Mainland is significant

  • A Mainland presence will allow Google to localize its operation.
  • Although Google has operated a Chinese language search engine since September 2000, it has been forced to run its China business out of an office in Hong Kong. This hindered Google's ability to market advertising services via its search engine to Mainland Chinese companies.
  • Google's business in China has been mainly limited to Google AdWords and Google AdSense.
  • Google's move should intensify competition in China's online search market.

China's Internet search market

  • According to iResearch, China's search engine market generated $151 million in 2004.
  • Baidu, Yahoo!, and Google were the top three companies in terms of search traffic in 2004.
  • Baidu.com is planning a US public listing in the Fall.

Google's relationship with Baidu

  • Google is a minority shareholder in Baidu.com.
  • Google invested $10 million in Baidu in June 2004.

Chen Wen, an analyst with CCID, a research firm under China's Ministry of Information Industry, the country's top telecom regulator

....Google will be Baidu's main competitor in China. Baidu has certain advantages in the short term, because Baidu's Chinese language search services are a lot stronger than Google's right now. However, in the long term, Google's Chinese language search services will definitely get stronger and so I expect that there will be some very fierce competition between the two.

Baidu spokesperson Bi Sheng's reaction

....China's search engine market is still immature and many companies have not realized how important a role search engines can play in their businesses. Therefore, I feel that the emergence of any search engine providers will foster the growth of the entire market.

....We do not exclude the possibility of cooperating with any company.

More from Interfax here.

More on Baidu's IPO plans here.

Comment: China just might be a large enough market for both Google and Baidu to succeed.

Source: Implications of Google's move to the Mainland (GOOG, BIDU)