Google Hits a Chinese Wall

Upstaged by Baidu.com, it's forging ties with local Web players to expand its reach

by Bruce Einhorn

(簡單的英文雙關 THE Chinese Wall是長城)

...With these deals, Google is cobbling together an anti-Baidu alliance, explains Richard Ji, a Hong Kong-based Internet analyst with Morgan Stanley (MS): "They are trying to isolate Baidu and prevent it from partnering with other major Web sites." The alliances give Google the chance to offer more features, and offer new support in its battles to extract better operating terms from Beijing.

Recent data show a modest bump up in Google's China traffic. But if the Mountain View (Calif.) company really wants to dominate the No. 2 Internet market, it needs to think big. Buying Baidu outright seems out of the question, even though Google was once a minority investor in its rival. With Baidu now a major disseminator of news on the mainland, there's no way China's leadership would give such a deal a green light.

What other options does Google have, then? Edward Yu, CEO of Analysys, has an idea: "Team up with state-owned media" such as Xinhua News Agency or The People's Daily. "These relationships would give Google China more share of the voice around government officials," says Yu. There's a precedent: Rupert Murdoch's News Corp. (NWS) last year became partners with a Web site run by state-owned China Central Television. Such a deal, though, would trigger criticism of Google among Americans for dealing with the powers that be.