google-china.jpgGoogle’s attempts to capture the hearts, minds and PC screens of Chinese web searchers have so far failed. But in a typically astute move, it is now looking to dominate China’s fledgling market for mobile search through a deal with China Mobile

China’s internet market is a potential minefield for western companies and many observers lump Google with Yahoo and eBay, which are no doubt already being used in business schools as textbook cases of how not to engage with China.

In December, eBay closed its main online auction site in China and replaced it with a JV in which Tom Online with a 51% stake is the dominant partner. The move was widely seen as an admission that its previous go-it-alone strategy had failed and eBay CEO Meg Whitman tacitly admitted as much in a conference call last month:

Like many US companies doing business in China, there have been many lessons to learn and this year we came to understand that a local partner was a critical factor to our long-term success. Tom Online has been an outstanding partner to Skype in China and I believe they’re also the right partner for eBay. “

Yahoo , meanwhile, has also had big problems defining a coherent China strategy and has suffered from leadership struggles — more in this EngagingChina story.

Fellow China blogger Shaun Rein, who runs the China Market Research consultancy, believes that Google, like eBay and Yahoo, has made plenty of mis-steps in China but its situation is not nearly so desperate. Google’s biggest mistake at least for western sensibilities, was its decision to surrender to Chinese authorities on the censorship issue.

But according to a survey conducted by CMR , censorship was not one of the top ten reasons given
by respondents for preferring Baidu, the home-grown leader of the Chinese search market, over Google. In fact, most Chinese did not even realise that the censored Chinese version of Google was any different from the English version.

It seems that Google’s censorship decision has been more of a hot topic for foreign critics than by Chinese end users themselves.

Google’s poor showing in China has a lot to do with execution issues according to Rein, who identifies Google’s hiring procedures in China as a particular problem. He says:

I know very talented people who either decided not to try to join Google after initial interviews or refused to even go into the interview process because of what they felt was a drawn out and absurd process. But the team is starting to get settled – and it is a very bright and talented group based on what I have found in discussions.”

Google’s China site also is also seen to have inferior content to Baidu. According to CMR’s survey, 20% of respondents said that they used Baidu because of the MP3 search function and other stickiness factors – such as virtual currency – that keep people coming to the portal. Rein says:

While Google has some awesome services for the English speaking market, their Chinese services pale in comparison to Baidu’s. This is something that Google needs to remedy and which Yahoo did by teaming up with Alibaba where the management team under Jack Ma is close to the consumers.”

Google, an unorthodox company, has clearly struggled to understand and adapt its business culture and its content to China and this has allowed Baidu to take a strong early lead. But I don’t think we should count the slumbering giant out just yet.

Indeed, a sign of the Google’s famous astuteness coming to the fore is the deal with China Mobile, the world’s largest mobile phone company. With China’s PC-based search market dominated by Baidu, it makes sense for Google to look at less explored markets in China and one such is mobile search.

The deal allows users of China Mobile’s Monternet portal to more easily search through its content, which including sports and entertainment news, ring-tones, games and videos. Users will be able to access the service via a search box or search link on Monternet’s homepage, or through a dedicated mobile search homepage on Monternet. The service will will be launched in the early part of 2007.

Mobile search is a market that has struggled to take off in the west. Relatively few mobile phone users access web pages on their phone — 10% to 15% typically — and advertisers are, at best, luke-warm because the small screen size of a mobile device makes it difficult to show advertising.

Nevertheless, with China Mobile’s “walled garden” approach to content, advertising is presumably of secondary importance and the function of the search box is to keep Monternet users looking at China Mobile-endorsed content, from which it earns not just traffic revenues but also presumably a share of the content revenues.

With 300m potential customers, if anyone can make mobile search work, China Mobile and Google can.

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