Search engine giant’s path to China is proving to be a bumpy ride 　　You have to hand it to Google; it knows how to make a big splash. When the doyen of search engines came to town to reinvent itself, no expense was spared. Booking the banquet hall of Beijing’s most famous five-star hotel, cramming it full of the cream of the IT world and a gaggle of journalists from 170 news agencies, there was a buzz in the air about an important announcement on April 12.
　　It came when Google CEO Eric Schmidt pieced together a jigsaw puzzle to reveal the name of the Internet search leader’s new Chinese venture--Gu Ge.
　　The Chinese rebranding of Google’s services means “harvest song” and is intended to convey “the sense of a fruitful and productive search experience, in a poetic Chinese way.” Whether it does that or not, Google is also intent on using China to establish a research center in Beijing, which expects to hire up to 150 Chinese engineers by the middle of this year and become Google’s biggest technical center outside the United States.
　　It’s the first time Google has opted for a foreign name, a move designed to woo the more than 111 million Chinese Internet users, a netizen legion second only to that of the United States.
　　Speaking to the media after the launching ceremony, Schmidt said that China accounts for only a small portion of Google’s revenue because the company has just recently obtained a license to allow it to carry local advertising. But he indicated that Google expects China to be an important part of its future business.
　　“I don’t know where [Chinese] revenue growth will be, but it will obviously be large,” he told Reuters.
　　Google has been operating under a hail of fire since the much-publicized U.S. House of Representatives hearing in February, when lawmakers attacked Google, Yahoo, Cisco Systems and Microsoft for assisting the Chinese Government by censoring Internet content. In the process the company saw its stock fall.
　　Taking a barrage of questions from foreign media about Google’s decision to rid its search results of any websites disapproved of by the Chinese Government, Schmidt explained that Google had a responsibility to abide by the laws of all the countries where it operates.
　　“It is important to operate Google’s worldwide services based on local statutes and local customs. It is not an option for us to broadly make information available that is illegal or inappropriate or immoral.”
　　
　　Battling locally
　　
　　Despite its number one status as a search engine worldwide, Google does not hold that position in China.
　　Two surveys released within a two-week period tell an interesting tale. American consultancy firm ComScore Networks reported in January 2006 that Google owned almost 40 percent of all searches in the United States in November 2005, a commanding lead of more than 10 percentage points over Yahoo, which came in second. On the other side of the Pacific a survey by the Internet Society of China, released in December last year, found 34.6 percent of Chinese Internet users chose a homegrown search engine called Baidu as their first choice, almost 10 percentage points higher than those preferring Google. Only 12 months previously, however, the organization found that Google was the absolute market leader in China, with 50.4 percent of local surfers clicking their way into its search box.
　　Revenue reveals its own story. According to a report of Shanghai-based Internet market analysis company iResearch on China’s major search engines, in 2005 Google was a remote third with revenue of 150 million yuan, way behind Yahoo’s 280 million yuan and Baidu’s 270 million yuan.
　　One month before Schmidt’s China trip, Li Yanhong, CEO of Baidu, made a defiant statement that in five years Baidu would be the dominant search engine in the Chinese market and Google’s market share would be nominal.
　　Ironically, it was in 2005, when Google began to flounder in China, that it made the decision to expand its operation on the mainland. The July 2005 announcement that it would open a product research and development center in China, and controversial hiring of former Microsoft Vice President Kai-Fu Lee to lead its Chinese operations, took the industry by surprise.
　　
　　Hunting for revenue
　　
　　In August 2005, Google authorized its first Chinese partner, a Beijing-based leading Internet marketing solutions provider for business, to sell Google AdWords services in China. Google AdWords is the only profit source of the award winning search engine and operates as a step-by-step system invented by Google, which allows users to create their own ads, choose keywords to help Google match the ads with the audience and pay only when someone clicks on an ad.
　　In the United States, potential advertisers learn how to use the system through a tutorial on Google’s website and pay Google directly for the service. But in China, with a far less web-savvy population, Google needs to hire agents to promote the service.
　　“The marketing model is where Google China’s major problem lies,” said Feng Yingjian, PhD. in e-commerce and expert search engine marketer. He explained that Chinese companies could access Google AdWords either by directly buying it from Google or through its seven Chinese agents.省略, Google charges both categories of customers at the same rate. According to Feng, this means Chinese agents could only earn profits by charging advertising agencies extra fees, which removes the incentive to train and expand a more Google-aware customer base.
　　“I don’t think Google fails to realize this obvious dilemma; instead their management failed to make a thorough study of the problem,” Feng told Beijing Review.
　　Another problem Feng warns may handicap Google’s localization efforts is its choice of Chinese operation chiefs. Of the two co-presidents of Google China, Kai-Fu Lee is a Taiwan-born and U.S.-trained scientist-turned-executive and Johnny Chou had studied and worked exclusively in telecoms before joining Google.
　　“I don’t doubt Kai-Fu Lee’s technical expertise or management capacity, but I don’t think he is the right person to lead Google’s localization efforts,” Feng said.省略 and appointing its founder Zhou Hongyi as Yahoo China president in 2004.省略 that no other company understands the essence of a search engine better than Google and its bottleneck in China is localization. He said the core of Google’s localization is to restore its general searching nature in China, where most of its users use Google specifically for non-entertainment-related purposes.
　　Lu Bowang, a senior IT analyst and consultant at China Internet Network Information Center, pointed to fraud as Google’s biggest problem. He suggests that Google should find a way to deal with the thousands of rogue ad agents, who don’t pay them a cent and harm the company’s credibility in the marketplace.
　　If Kai-Fu Lee could register them, then these fraudulent agents could bring in big profits for Google China, as they know the local market and could promote Google’s AdWords, Lu told Beijing Review.
　　Explaining Google’s drop in performance over the last year, Lu said there was another side to the story. According to a survey Lu hosted in the first half of 2005, Google remained the most popular search engine among non-student users, an audience with more spending power, yet the company is not taking profitability as its top priority right now.
　　From the perspective of an ordinary Internet searcher, Lu said his experience with Google’s Chinese services is more pleasant than that with Baidu. The latter adopts a search advertising monetization model that always places the paid placement links above search results without marking them as sponsored links. This could run to as many as three pages. Lu believes Baidu’s practice is disingenuous, which would be found out by users sooner or later.
　　“In contrast, Google has all the sponsored links marked, either under a column on the right or in a different color at the top,” Lu said.
　　
　　Adhering to local requirements
　　
　　Different from Yahoo, which moved all its Chinese service servers to China in 2005, Google has yet to install a server in China. But this makes no difference to the censorship standards between Yahoo and Google or any local Internet company. The same censorship rules apply to all players.
　　An anonymous source from China Internet Network Information Center (CNNIC), China’s official Internet industry association, told Beijing Review that content of websites supported by servers stationed abroad has to be monitored by China’s firewall before reaching Chinese audiences and websites with servers stationed in China are required to conduct self-censorship according to government regulations.
　　The source also said Chinese Internet censorship agencies closely monitor the content of domestic websites and punishment, including the suspension of operating licenses, could be meted out to those breaking the law.省略 website January 23 and added a warning message below the search bar in Chinese that read: “According to local law and policy, some search results are not displayed,” it was in keeping with the local requirements, said the CNNIC source.
　　Answering questions at a press conference in March, Chinese Premier Wen Jiabao said, “Internet monitoring is an internationally common practice and China attaches a great deal of importance to attracting international experience in Internet monitoring.”
　　Asked about the procedures for filtering information online, an anonymous official from the Internet Society of China declined to give Beijing Review any comment on this question. He did say that, “Many countries in the world, including the United States, are monitoring and screening the content of the Internet.”
　　Xie Xinzhou, professor at the School of Journalism and Communication, Peking University, specializes in studies of new media. He has been working on a project of national comparative studies of management mechanisms for the Internet. He told Beijing Review that monitoring of politically sensitive topics is not unique to China. He has found that in Singapore three kinds of Web pages, political parties’ Web page, Web pages focusing on Singapore’s politics and religions and e-paper Web pages, are required to register with the country’s Web watchdog and to maintain a stable editing team.
　　Xie claims that effective Internet administration could beef up freedom of communication rather than harm it. He believes freedom of communication is a relative concept and the prerequisite should be not harming other people’s interests and obeying social norms.
　　“Like rules governing road traffic, you need traffic rules to govern the information highways,” Xie said.

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