BIDU is up over 50 points this afternoon. A reward for toeing the line.
The NYT headline is misleading. I seriously doubt that Google's departure, if it happens, will have much of an impact on the development of the Internet in China.
Google Exit Threatens Chinese Internet, Analysts Say
By DAVID BARBOZA
New York Times
Published: January 13, 2010
SHANGHAI — If Google leaves China, the country will suddenly become even more dependent on its main homegrown search engine, Baidu.com. And while that is likely to benefit the Chinese company in the near term, analysts say it could bode poorly for the long-term development of the Internet in China.
Baidu is hardly an upstart. The company has 300 million users and a stock valued at more than $13 billion, and it is the market leader in China, by a wide margin, with a commanding 63 percent share to Google’s 33 percent, according to iResearch, a consulting firm.
“It’s a duopoly in China,” says Richard Ji, an analyst at Morgan Stanley. “There’s just Baidu and Google. And Baidu’s way ahead.”
Baidu did not comment Wednesday on Google’s announcement.
One reason for Baidu’s dominance is its close compliance with the nation’s tight Internet regulations and its censorship of Internet content. Baidu played along and Google did not like to, experts say.
“Baidu keeps a great relationship with the government,” says Hong Bo, a consultant at 5G, a Beijing-based consulting firm. “If the government wants something removed it will do it immediately. On the other hand, everything with Google has to go through its headquarters.”
That, and local control, might be why Google never closed the market share gap with Baidu.
Still, analysts say Google had been waging a fierce battle for Web supremacy here, promising to unseat Baidu, a company that Google held a small stake in until June 2006.
Google executives claimed they had the better technology; Baidu executives insisted that they knew what Chinese users wanted.
Rather than just search, Baidu is a supermarket of Web offerings, many of them imitations of other popular Web sites like Wikipedia, MySpace and, soon an online video site Baidu has modeled on Hulu.com.
“It’s a conglomerate,” Mr. Ji said. “But most of the revenue comes from search.”
Google had made some inroads against Baidu last year, under Lee Kai-fu, a former Microsoft executive. But Mr. Lee announced his departure from Google in September, saying he was forming a start-up of his own.
Now, Google is hinting that it may follow Yahoo and Ebay and virtually disappear from a country that has the world’s largest Internet population — estimated to be 338 million users.
“It’s the epitaph for U.S. online involvement here,” said Anne Stevenson Yang, a Beijing-based principal at Wedge MKI, an equity research firm. “Media is always a losing proposition in China.”
For its part, two months ago Baidu just moved into a massive, new headquarters in Beijing, and it was rolling out a series of new ventures it hoped would excite consumers and investors.
But many analysts say Baidu may suffer over the long term if Google closes its China operation.
“The whole industry will become worse,” says Yu Yang, chief executive of Analysys International, a Beijing-based research firm. “As for Baidu, without competition with Google, Baidu has no motivation to innovate.”
Baidu has faced increasingly stiff competition in China, not just from Google, but from other popular Internet companies, like Tencent and Taobao, the leader here in online shopping. Google’s move to exit the country would eliminate some of that competition and give Baidu a boost. “This will definitely benefit Baidu,” said Wallace Cheung, an Internet analyst at Credit Suisse.
Baidu was founded by Robin Li, a graduate of one of China’s top schools, Peking University. He later studied computer science at State University of New York at Buffalo, and then began experimenting with search engine technology.
Larry Rafsky, who worked with Mr. Li in the 1990s at a software company, says he was a pioneer, developing some of the first ranking technology.
He invented a “page ranking algorithm virtually identical to what we know about Google’s first attempts,” Mr. Rafsky said in an e-mail interview a few years ago. “He first called it Rankdex.”
While in the United States, Mr. Li also worked at Infoseek, one of the earliest search engine companies, and then, around 1999, he returned to China to found Baidu.
The company went public on the Nasdaq Stock Market in November 2005 at $27 a share. Today, its shares are worth about $386 — which makes Baidu one of China’s richest technology start-ups.
Mr. Li, 41, is one of China’s wealthiest entrepreneurs, worth an estimated $3 billion, according to Forbes.
Chen Xiaoduan and Bao Beibei contributed research.
nytimes.com |
