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April 29, 2007 6:25 pm

Google upbeat about China market

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Google is on track to lead China’s internet search market and is moving to give its Beijing-based operations greater autonomy to respond to local needs, says Eric Schmidt, chief executive.

Mr Schmidt’s unusually upbeat message on China makes it clear that Google believes it is finally making progress in a market where it has struggled to deal with issues of censorship and local regulation and still trails Nasdaq-listed local lookalike

“In the last four months we have had more growth [in internet searches] than the preceding two years in China,” Mr Schmidt told reporters in Beijing.

“We were late entering the Chinese market and we are catching up. Our investment is working and we will eventually be the leader.”

Google was widely seen to be struggling to match Baidu in China after launching a local service, www., last year.

Google’s choice of “Guge” or “harvest song” as its local name has been mocked and it is often cited in local industry as an example of a foreign internet company failing to make an impact in China, following setbacks for Yahoo, Ebay and MSN.

Foreign companies have been criticised for failing to adapt to China’s online scene.

However, Mr Schmidt said one of Google’s “big projects” this year was to grant greater autonomy to local management in China.

“As [Google] China gets more established, it will have its own voice, its own expression and, I think, its own look,” he said.

Mr Schmidt declined to give details of the recent increase Google had enjoyed in its Chinese language search traffic, or to say how it was divided between the company’s local and international services.

However, he cited “third-party” observers as showing that Google’s overall China market share was growing. “If search grows, monetisation follows very closely thereafter,” he said.

Google’s share of search market revenues in China rose from 13 per cent in the first quarter of 2006 to 19 per cent in the first three months of this year, according to Beijing-based research consultancy Analysys International.

Analysts estimate that Baidu’s market share rose from 44 per cent to 57 per cent over the same period – but that the Chinese company’s share declined slightly from the last quarter of 2006 as Google grew.

Although Baidu markets itself on its Chinese expertise, Google insists its Chinese search functions are “much better” than its rival’s.

“We have used the technology invented in China to improve the quality of search in all Asian languages,” Mr Schmidt said.

Yet Google is far behind Baidu, which on Friday released first-quarter results that showed its sales had more than doubled compared with the first three months of 2006 to reach Rmb276m ($35m). Baidu’s profits rose 143 per cent.

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