Last week, Google announced it might exit from China market because of a recent hacker incident and Chinese government’s interference over Internet.  This came as a surprise to most industry watchers, especially when Google China’s business is in fact getting better and better.

Recently, it was able to gain market share from the local leader, Baidu. Google had a 35.6% share of market in the fourth quarter last year, compared to 31.3% in the third quarter, while Baidu’s share fell to 58.4% from 63.9%, according to Analysys International, a Beijing based market research firm. And this is a dramatic difference from what Google had 3-4 years ago, when it just entered China market – Google’s market share was as low as 16% in the second quarter of 2006, a year after it set up its China office.  At that time, Baidu had 50%, according to Analysys International.

And Google has momentum to do even better.  Google developed mobile search much earlier than Baidu.  According to former Google China president, Lee Kaifu, Google started developing mobile search in 2007, and it was, and still remains, one of its key focuses.  It has China Mobile, China’s largest mobile operator, as its mobile search partner since 2007.  Baidu only started to develop mobile search last year, and last May, partnered with the smallest of the three operators, China Telecom.  As 3G rolls out in China, more and more people will search the internet with their phones. Google’s advantages (over Baidu) should be even more apparent.

If Google can gain a further 5% from Baidu, that is 40% against Baidu’s 50-55%, Google will no longer be just a small rival. It will be a serious competitor to Baidu, and a powerful player in China internet space. So, why it chose to leave China market now?

With 384 million users, China has become the world’s largest internet market and it is still growing very fast – internet users increased 28.9% from a year earlier. (Note: the figure is from CNNIC, a Chinese government back research institute.) Moreover, it has a lot of room to grow, as only 29 percent of China’s population is online.  Why walk away from such potential, when your China operation is in fact doing well?

It is really bizarre, from any business points of view. But, an industrial insider suggested, there might be a chess game being played right now.

(Read complete article.)

In a rather surprising move, Google said it might exist from China.

“We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China,” said David Drummond, SVP, Corporate Development and Chief Legal Officer in a statement. (Reference link: http://googleblog.blogspot.com/2010/01/new-approach-to-china.html)

If that is the case, it will a major setback to its effort in China, the world’s largest internet market. Since it started Google.cn and its China office in mid 2005, Google has gradually improved its services in the country. (See earlier posts:
New Broom may sweep Google China ahead, Google, Baidu do battle in China’s 3G frontier) Recently, it was able to gain market share from the leader, Baidu. According to Analysys International, Google had a 35.6% share of market in the fourth quarter, compared to 31.3% in the third quarter, while Baidu’s share fell to 58.4% from 63.9%.

All these effort will be wasted if Google start bargaining with Chinese government, which is unlikely to win the search giant any concessions from Beijing censors.

For 24-year-old “Momo” Wang Liyuan, creator of the hugely popular Tuzki rabbit character and emoticon popular on QQ and MSN and elsewhere, 2009 was a memorable one. The official website, www.clubtuzki.com, was launched and won a gold award for best design from Promax/BDA, a worldwide association of broadcast and multimedia designers.

Her first book, I, Tuzki, U, won the best book design at the Seventh National Art Exhibition and Book Design Awards organized by the China Publishers Association, and also became a best seller in many Chinese cities. Over 500 fans lined up for Wang’s autograph at an I, Tuzki U book signing and the first Tuzki iPhone application, TuzkiSnap, was on the market in November.

All of this was unimaginable when Wang first developed the bunny in the end of 2006 while a third year student at the Animation School in Communication University of China in Beijing. (Read article at Global Times.)

A three-year battle to be China’s leading video-sharing site is coming down to the wire, with front-runners Tudou and Youku looking for recognition as the mainland equivalent of YouTube, the hugely successful US-based site.

The reward for the fleetest could take the form of an initial public offering (IPO) in Nasdaq, the United States share market often favored by Chinese technology companies for raising cash. The founders and venture capital backers of the first past the Nasdaq post can anticipate cashing in their investments and consider the prospect of a soaring share value. The losing company faces a less illustrious future, with a possible sale to a rival or another Internet company. (Read article in Asia Times.)