Google's Chinese takeaway for UK businesses

If even Google has trouble cracking this tough new market, what chance have smaller firms got?

Last Updated: 31 Aug 2010

More bad news for Google in China, after Dr Kai-Fu Lee, the head of its operation there, announced that he would leave in mid-September to start a new venture (the business equivalent of politicians quitting ‘to spend more time with the family’). Lee’s abrupt departure completes a bumpy four years for Google in China, where it has struggled to reconcile its mission – to organise the world's information – with the tight censorship of the Chinese authorities. The sheer size of the Chinese market – its internet population is nearly 300m – makes it a key one for Google, as for many businesses. But if the all-conquering search engine behemoth can’t make it there, what chance have fledgling firms got?

When Google poached Lee from Microsoft in 2005 (prompting a legal row between the two firms that was eventually settled out of court), it had high hopes of overtaking Baidu, China’s dominant internet search company. And let’s face it, it hasn’t had too many problems on this score elsewhere, having left the likes of Yahoo, MSN and Altavista trailing in its wake in the west. Unfortunately, four years on, analysts reckon Baidu controls over two thirds of China’s search market compared with Google’s relatively meagre 29%. (Not quite what Google had envisaged, we suspect.)

The irony is that many of Google’s problems have been caused by trying to appease the Chinese authorities, who are not too keen on users being able to look at naughty pictures and, perhaps more importantly, criticism of the regime. Much to many people’s surprise, Google agreed to censor its searches, banning certain keywords and foreign webpages – but this just sent many of its users straight back to Baidu. It also seems to have affected reliability, with users facing frequent disruptions to their internet browsing. At the same time, it faced heavy criticism for apparently abandoning its principles (its 'Don't do evil' policy was quietly dropped around the same time) in naked pursuit of market share. Not everyone agreed that it was right to conform to local mores; in fact, many feel this was the moment when Google became a regular corporate, rather than a cuddly well-intentioned start-up.

If nothing else, this should serve as a cautionary tale for businesses entering new markets. Google’s business model has been extraordinarily successful across the world, but its whole ethos was never going to do down well in heavily-censored places like China. So it tried to adjust its approach accordingly – but despite bending over backwards to please the powers-that-be, it continues to struggle. And somehow, we suspect the Chinese authorities won’t be losing any sleep about the multinational losing out to a local incumbent. Back to the drawing board then...

PS. If you’re thinking about how to get your message across better in China, click here for MT Expert’s Ten Top Tips

In today's bulletin:

G20 talks stimuli - as car sales rise again
Google's Chinese takeaway for UK businesses
Moulton quits as Alchemy boss after boardroom bust-up
Editor's blog: You get what you pay for
Bat off tricky questions, with YouTube

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