Google hits exit key (3)

08:49, March 24, 2010      

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However, while Google's departure from the Chinese Internet market - the largest in the world with more than 350 million users - provides new opportunities for its rivals, such as Baidu, NetEase, Tencent and even Microsoft, in the long run the market will suffer due to a lack of competition, he said. Baidu had almost a 60-percent share of the market in China in the fourth quarter of last year, with Google accounting for 35 percent, show figures released by Analysys International. The closest domestic challenger to Baidu is Sogou, developed by Sohu.com, which has just a 1-percent market share.

"It seems Google doesn't really want to leave China but they have to do something because of its announcement in January," said Yu. "Maybe the company will come back to the mainland in two or three years."

Google has invested about $380 million since 2007, according to government figures. However, analysts estimate its annual revenue in China ranges from $300 million to $600 million, a small portion of its $24-billion annual revenue.

The company plans to maintain an advertising sales force as well as its large research and development operations in China. However, it risks losing market share, revenue and staff to rivals. Opportunities to develop and market its Android and Chrome operating systems for cell phones and computers in China could also be threatened, a potential setback for partners such as handset makers Dell and Lenovo.

"If Google leaves its R&D unit in its current headquarters in Beijing ... the staff will remain, so I think our activities will continue," said Arthur Wang, chairman of Beijing Google Technology User Group, one of Google's largest software development groups. Advertisers, however, could take a more cautious approach until they see if traffic to Google's Hong Kong site gets the same traffic as its shuttered China site, said Kaiser Kuo, a China-based technology commentator.

Google.hk refused to reveal its market share in the region. However, Antony Yiu, North Asia director for online marketing agency iProspect, said Google.hk occupies about

40 percent and predicted the redirection of traffic from the mainland "will have limited influence on its business".

Jessica Powell, a Google spokeswoman, said a meeting was called to update all 600 staff at its headquarters in Tsinghua Science Park, Beijing, on Tuesday but declined to give details. "We haven't worked out all the details so we can't ever rule out letting people go, but we very much want to avoid that," she said.

Google employees were tight-lipped as they hurried to work past waiting reporters, and the blinds were drawn on most of the windows. Chinese passers-by laid flowers and chocolates on its large metal "Google" sign. However, online a few Chinese netizens displayed their anger at Google's decision. "Go away, Google," wrote a netizen named Kaisei on sina.com, a popular news portal. "It wants to earn money from China but doesn't want to obey our laws."

It is not clear whether the Chinese government will block Google.hk in response to Tuesday's move. The company's Gmail e-mail service was still accessible from within China, as was its news page. However, attempts to call up specific articles on China were blocked.

"There are probably many debates going on at the top about what to do next. The ball is now in the Chinese government's court," said Duncan Clark, chairman of BDA China, a domestic investment consultants.


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