Google Will Do Better in China, Schmidt Says

By
Sumner Lemon
July 21, 2007, 10:55 AM ET
2 min read

— -- Google Inc. will do better in China, but don't look for the company to dominate the market anytime soon, the company's top executive said Thursday.

"Although it does not appear we are number one in the market, it looks like we are now in a situation where we are quite competitive," Eric Schmidt, Google's chairman and CEO, told investors during a conference call.

Google has invested heavily in China, setting up R&D centers and developing a search engine that censors results that government officials aren't likely to approve of. But despite Google's best efforts and the hiring of former Microsoft Corp. executive Kai-fu Lee to lead its Chinese operations, the company trails far behind local rival Baidu.com Inc.

Google is the sixth most-visited Web site in China, with 4.4 percent of respondents choosing the search engine as the site they visit most often, according to an IDC survey released earlier this year. By comparison, Baidu ranked third, with 11.2 percent of respondents saying they visit the Chinese search engine more than any other site.

Baidu also has a strong lead over Google in China's online advertising market, with a 16.5 percent share of the market in 2006, IDC said. Baidu earned US$105.2 million from online ads in 2006, making it the number two player in the market behind Sina Corp., which runs China's top Internet portal.

GoogleChina ranked sixth in the country's online advertising market, with revenue of $38.7 million and a 6.1 percent share of the market, IDC said.

Despite trailing behind its main rival, Google is upbeat about its prospects in China. Speaking to investors on Thursday, Google CFO George Reyes said the company's growth rate in China was "healthy."

Schmidt said Google has a strong team in China and offers Chinese search capabilities that match or exceed those from rivals.

"It's a very good start and although we don't think that this will result in an immediate huge success, we think that the tenacity of Google ... will bring significant victories in China over the next few years," he said.