The Financial Times today has an interesting article (subscription) on the few markets where global search megalith Google is not the market share leader. These include Russia, the Czech Republic, Japan, Korea, and as anyone reading this blog probably knows, China. Here Baidu is king, with about 60% of searches. Google CEO Eric Schmidt had the following to say about Baidu's dominance in China:

Eric Schmidt, Google chief executive, said in an interview with the FT last month: “Because Baidu had such a head start largely because of the various bizarre laws that China has with respect to foreign media. It will take a while, but we will eventually do well there.

“All of us should tell the Chinese that their local markets need to be open to foreign investment, they need not favour their local competitors.”

Imagethief notes that the quote, which comes from an earlier interview, is nearly a month old and has not caused any noticeable fallout here. Still, when the CEO of a global corporation with a prominent presence in China refers to Chinese law as "bizarre", their local PR people's teeth probably start vibrating. I know mine would. While there isn't any fallout now, that's the kind of comment that gets stored up for later when you have a problem or need a favor from the government.

Of course the Chinese government does favor local competitors, the regulatory environment often makes life difficult for foreign companies (especially media companies), and Schmidt is probably capable of taking a calculated risk in referring to these things. But Imagethief isn't sure that regulatory issues and an unfavorable competitive environment explain everything about Google's second-place status in China. After all, the search engine runs, is available nationwide, works fast and is reportedly popular among urban professionals.

But when Google first launched in China, local users cited Baidu as returning more relevant results. And as powerful as the lure of international brands can be in China, the pride in local champions is often more powerful still.

Where, however, did Baidu's relevance come from? Baidu's MP3 search, for which Google has no analog, drives oodles of traffic, its legality notwithstanding. Perhaps Baidu maintains its relevance by being willing to stoop to levels that Google will not. There must be a reason why Google is strong with audiences for whom the search for music tracks is clearly not the first priority. If this is the case, Googles problems might not be rooted in the regulations themselves, but in very selective enforcement that favors a flagship local company.

For more on this possibility, I strongly suggest you read David Wolf's new post on the ethics of Baidu, which looks at some of the implications for all foreign companies doing business in China, and the very interesting story on Baidu's business practices from The Register that inspired it. From The Reg:

Music searches using Baidu return results that are heavily skewed in favour of unlicensed music, while they rarely return search results for licensed music sites. Meanwhile, the unlicensed MP3s appear to systematically move around a complex network of domains in response to infringement notices.

Chinese web surfers may be forgiven for missing the news. Baidu fails to link to news stories critical of the company, including some of the findings below; these have been covered only by a handful of publications within China. It's a chilling reminder of the ability of a web search engine to control and shape public discourse.

Both Wolf's post and the Register article are well worth your time. Makes one think about the claims being thrown around concerning Baidu's possible screening of negative search results for Sanlu.

Truth from facts, anyone?

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