Google vs. Baidu

Google is going head-to-head with local search firm Baidu in China, but it will be an uphill battle in its quest for domination.

A Reuters article writes about the challenges the internet search company faces - from tying up with local partners, hiring local talent, understanding local tastes, and of course, navigating local rules of a different standard.

Today, Baidu dominates the country's Web search market. In the third quarter, it chalked up a 61.5 percent share of the 811.7 million yuan (US$110 million) market, compared to Google's 22.5 percent share.

While Google will no doubt do all it can to succeed, the Chinese market is littered with American Internet companies that have failed there. In 2003, eBay bought the largest Chinese auction company — and lost market share. In 2004, Amazon bought the largest Chinese online merchandiser — and lost market share.

But perhaps, Google can take its cue from one US company that has managed to crack the China puzzle.

A recent Fortune article traces how Microsoft engineered a turnaround of its fortunes in the country.

In fact, so cosy is the relationship between Microsoft and the powers-that-be in China now, that when Chinese president Hu Jintao toured Microsoft's Washington campus recently, he told Bill Gates: "You are a friend to the Chinese people, and I am a friend of Microsoft. Every morning I go to my office and use your software."

It was not always like that though. When Microsoft entered China in 1992, the company's business was a flop for a decade. All the basic things that had led to its success in the US and Europe failed in China - until it figured out the importance of having a collaborative approach with the government.

Microsoft's CEO for Greater China, Tim Chen, said:

"If a foreign company's strategy matches with the government's development agenda, the government will support you, even if they don't like you."

Some things may have to give though. When Fortune's senior editor David Kirkpatrick, asked Bill Gates how he dealt with the Chinese government's well-known intolerence for unfettered free speech on the internet, this was the reaction.

His silence lasted so long I found myself piping up out of discomfort. "That's a very pregnant pause," I said. "I don't think I want to give an answer to that," he finally replied.

Just to see how Google and Baidu matched up, I decided to try the two search engines. Typing in innocuous terms like "chocolate," "cancer" and "sex" pulled up the usual suspects of desciptions, websites of hospitals, Godiva, Hershey and porn sites.

So far, pretty boring. I then keyed in hot potato terms "democracy" and "Falun Gong". Google's top result was a Wikipedia definition, Baidu's was the website of Miro, an internet TV site. As for the second term, Google had news results and another Wikipedia definition. As for Baidu, nothing. You heard me there...I refreshed the page several times and each time returned a blank page. Go try for yourself.

To be successful in China, Google probably needs to follow the example of Microsoft in courting the government and toeing to local laws. But in doing so, will we one day also draw a blank page when we Google search for sensitive topics in China?