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Search engine stalls in China

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Google Inc. has endured the ire of the Chinese censorship machine. In its nine years in China, it has been slowed down, shut down and accused of peddling smut.

The Mountain View, Calif., search engine also has been humbled by its main Chinese rival, the home-grown Baidu Inc., which enjoys double the market share and has long been suspected of receiving preferential treatment from the government.

Now, with the resignation of its popular chief of China operations, Kai-Fu Lee, Google appears to have taken another punch to the chin in its quest to win over the world’s largest and fastest-growing Internet market.

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Lee stepped down from his post early this month to launch a $115-million fund to finance Chinese tech start-ups.

On the surface, Google’s squabbles with Chinese authorities appear to be the company’s primary challenge. Over the years, service has been intermittently stopped and delayed by the government. This despite Google’s agreement to block politically sensitive sites, a move criticized by free-speech advocates.

But some analysts say Google’s shortcomings in China can be directed to its most glaring weakness: lack of brand awareness.

Google, a leader in innovation, may be the search engine of choice for China’s elite. But two-thirds of the country’s 340 million Internet users are young and not college-educated. Many of them are drawn to Baidu’s easy access on its home page to pirated songs and online message forums, neither of which are quite so easy to find with Google.

“It’s not that Baidu is doing a better job than Google with products; some are actually worse,” said Edward Yu, chief executive of Analysys International, a Beijing tech consulting firm. “The problem is brand awareness. People don’t know Google. They don’t even know how to pronounce it.”

Google renamed its Chinese site GuGe three years ago because people here struggled to speak and spell its name. But even that has failed to fully resonate; many Chinese choose instead to call the search engine GoGo. Internet users have only to type G.cn in the URL to access Google’s Chinese site today.

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Analysts say one of the reasons Lee was resolved to leave his post at Google was because of disagreements with the U.S. headquarters over marketing strategies in China. They say it was hard for officials in the West to comprehend the complexities of the Chinese market, coming as they do from an area of the world where Google already is so dominant.

“Google never seemed to drive brand awareness,” said David Wolf, president of the Beijing tech and media advisory firm Wolf Group Asia Ltd. “Let’s face it -- it grew most places by word of mouth. It’s never had to build a marketing operation. Here it’s entirely different.”

John Pinette, a Google spokesman in Hong Kong, said promoting the company’s products was one of the biggest challenges in China but hinted that more aggressive marketing was on the way. And although the company regretted Lee’s departure, Pinette said, Google would still distinguish itself by creating cutting-edge features.

“People associate us with foreign searches and English-language searches,” Pinette said. “It’s up to us to present Google to university students or other people [in China] as a relevant and interesting place to go.”

Google got a head start in China, introducing a Chinese-language version of its search engine in 2000, a year before Baidu launched its site. But Google ran its site from the U.S. for several years, waiting until 2005 to open an operation in China. That gave Baidu time to build its organization, ramp up its sales force and snatch advertising from Google.

Baidu is a “faster and more nimble competitor,” Pinette said. Google said this month that it would double the size of its sales team in China, though Pinette declined to say to what level. Google marketing teams are currently traveling to 25 cities in China trying to promote its services to small firms.

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Despite accusations that Baidu blurs the line between its search results and paid advertisers, the domestic search engine has dominated the marketing and public relations front.

“Baidu has played the local card very well,” Wolf said. “The perception is it services Chinese needs better.”

Baidu representatives did not respond to several requests for an interview.

Several years ago, a Baidu video advertisement circulated online depicted a Chinese man in Ming Dynasty garb using wordplay to batter a Western man speaking poor Mandarin. The message: Google doesn’t speak Chinese. Baidu does.

“I only use GoGo to find foreign websites,” said Ye Zhihui, a 28-year-old computer programmer in central Henan province. “If I need anything in Chinese, I use Baidu.”

As in the United States, search engine names have become a verb in China. But when Ye needs to search something, he doesn’t say “Google it.” Instead, he says, “Baidu yixia” (“Baidu a little”).

The Chinese firm boasts a 61.6% share of the nation’s search market revenue compared with Google’s 29.1%, according to Analysys International. Yahoo stands at third place with 5.6%.

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Although the immediate outlook for Google appears lackluster, experts say the company has been positioning itself to seriously challenge Baidu in two areas: cellphone services and licensed music.

China’s biggest cellphone service provider, China Mobile Ltd., is unveiling a series of handsets equipped with the Google Android operating system. Google also has been advertising the use of Google maps on cellphones.

Although the market for online advertising on cellphones remains in its infancy in China, the volume of Internet search engine usage on handsets has grown 120% in the last 12 months, Analysys International said.

In China’s fast-growing cellphone market, the online giant and Baidu each control about a quarter of the total mobile search market. Google, however, is expected to see a boost with the introduction of China Mobile’s new third-generation technology.

China leads the world in cellphone users with 700 million, and unlike in the U.S., many of them use their handsets as a primary gateway to the Internet because they can’t afford personal computers.

On the music front, Google maintains a partnership with leading music labels to offer free downloads through a third-party site, Top100.cn. The feature is exclusive to China.

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It also puts Google squarely on the legal side of the music matter. On the other side, Baidu has been sued by record labels for providing links to pirated or unlicensed songs. The service is one of Baidu’s most popular features.

But in a move that could serve as a major blow to Baidu, China’s Ministry of Culture said last month that providers of online music would have to begin supplying copyrights to songs.

Although mobile phones and music may help Google in the long run, analysts say the loss of Lee will sting the company. The 47-year-old Taiwanese native is considered a visionary and has forged a large following with the success of his self-help book “Be Your Personal Best.”

“He’s charismatic and beloved by young people in China,” said Kaiser Kuo, a Beijing writer and local Internet expert. “He handled his personal brand so extremely well. Those are mighty big shoes to fill.”

In his place, Google has selected two in-house executives: Boon-Lock Yeo to oversee engineering and John Liu to head sales.

Lee has used his blog (blog.sina.com.cn/kaifulee) to dismiss rumors about why he left -- from accusations that he was being investigated for tax evasion to speculation that Google was leaving China.

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He also said he delayed his departure from Google to address the government’s complaints that pornography was slipping past the search engine’s filters. Lee said the scrutiny was not the reason he resigned to start his venture capital firm, Innovation Works.

“Please stop spreading these groundless rumors,” Lee wrote. “The reason for my resignation is very simple: My new job is too exciting!”

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david.pierson@latimes.com

Tommy Yang in The Times’ Beijing bureau contributed to this report.

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