Google China Pullout Would Boost Baidu, Opens Field To Small Rivals - WSJ.com
By Aaron Back
Of DOW JONES NEWSWIRES
BEIJING (Dow Jones)--Google Inc.'s (GOOG) potential pullout from China will throw much of the country's Internet economy into turmoil, but there could be some beneficiaries.
Baidu Inc. (BIDU) will immediately benefit if its main competitor vanishes. But analysts say a pullout by Google would also be good news for various Chinese Internet portals such as Netease.com Inc. (NTES), Sohu.com Inc. (SOHU), and Tencent Holdings Ltd. (0700.HK)--all of which have their own search engines with negligible market share.
"With the easing of competition from Google, it's actually going to benefit everybody. The small operators now see an opportunity to gain some market share," said Elinor Leung, an analyst at CLSA. "If Google pulls out from the market completely, it will be a fight between Tencent, Netease and Sohu for the number two spot."
Google had 31.3% of China's search engine revenue at the end of the third quarter,
compared to 63.9% for its rival Baidu, according to estimates by research firm Analysys International. The remaining 4.8% of the market is divided between several players, including the three portals and Yahoo! China, which is owned and operated by Alibaba Group.
On Tuesday, Google said it would no longer censor results on its Chinese site Google.cn, and that
it was working on reaching an agreement with Chinese authorities on how to do so within the bounds of Chinese law.
"We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China," David Drummond, Google's chief legal officer, said in a post on the company's official blog.
Baidu is unlikely to emerge as the sole dominant search engine, said CLSA's Leung. While most markets around the world typically have one dominant search engine, there is also demand for at least one alternative search engine, which can have 10%-30% of the market, she said.
Thus a departure by Google would open up a significant market opportunity for companies other than Baidu.
Baidu and Netease declined to comment. Spokespeople for Tencent and Sohu were not immediately available to comment.
In after-hours trade on Tuesday evening, Baidu shares were up 7% to $413.52. They had closed down 3.5% after the Baidu site was hacked and temporarily disabled, apparently by an Iranian group.
Netease and Sohu were up 4.17% and 1.07% respectively in after-hours trading in the U.S., having both closed down in Tuesday's session. In Hong Kong, Tencent shares were up 0.9% at HK$170.1 Wednesday.
To be sure, other Google partners in China could find their plans disrupted, though analysts said they don't see a significant impact. Sina Corp. (SINA), one of China's largest Internet portals, will be put in a tough position as it currently partners with Google to offer its search bar on its home page. Sina will likely have to find a new partner if Google ceases its China operations.
Officials at Sina did not immediately respond to requests for comment.
Telecom operator China Mobile Ltd. (CHL) has already released several smartphones that run on Google's Android operating system, and is planning many more in partnership with various handset makers. The collaboration is part of China Mobile's competitive answer to rival China Unicom (Hong Kong) Ltd. teaming up with Apple Inc. to offer the iPhone in China. China Mobile didn't immediately respond to request for comment.
But Paul Wuh, an analyst at Samsung Securities, said the impact on China Mobile will be limited. Android is an open-source platform that China Mobile customized to its own needs, so it doesn't technically require Google to have China-based operations, he said.
But China Mobile will lack a local partner in developing the line of phones, and may have to limit the extent that Android phones integrate with other Google services, Wuh said. For instance, Google's Chinese site is currently the default mobile search page for China Mobile users.
In China, 63.9% of Chinese use our rival Baidu,
and now Google is in trouble :"it was working on reaching an agreement with Chinese authorities on how to do so within the bounds of Chinese law."Google copied about 80000 works as e-book without the license of Chinese authorities
,this is the reason but not cyber attack,and indact baidu was attacked yesterda
Baidu (
www.baidu.com), China's biggest search engine, was hacked on Tuesday morning, and is currently inaccessible.
The defaced site also included a message that said, "This site has been hacked by Iranian Cyber Army."
Chinese netizens pointed out that the hackers, who call themselves "Iranian Cyber Army", changed Baidu's DNS records, redirecting traffic to another site.
Baidu responsed that we found
www.baidu.com cannot be accessed, the reason was that the domain Baidu.com was unauthorized tampered by American IDC.