Forging Ahead, Google China Tries to Forget 2006

By staff reporters He Huafeng (Beijing), Yan Jiangning (Davos, Switzerland) and Li Qing (Silicon Valley)   

“Ninety-five!” said an enthusiastic Eric Schmidt, CEO of Google Inc., when asked to score the Internet giant's staff in China. 

The high score and Schmidt's public confidence undoubtedly cheered Google China leader Lee Kai-Fu, who joined his boss at a recent press conference in Beijing. 

Such unshakeable support from the company's U.S. headquarters has not come easy. Bombarded by negative reports in the Chinese media and forced to admit mistakes, Google China and Lee have weathered a tough year. 

The world's largest search engine is also wrestling powerful Chinese rivals, particularly the country's leading search site Baidu.com. 

But Lee appears to be making headway. His strategy includes an ongoing hunt for Chinese research talent and an active program of corporate communication. 

A monthly, cross-Pacific flight to Silicon Valley is an indispensable part of Lee’s work schedule. The primary arrangements for his California visits rarely change: Lee presents a work report to Schmidt and then answers questions about the mainland posed by American colleagues. 

But Lee, a scientist also known as “the godfather of the Microsoft China Lab,” does more than win CEO support and educate his western colleagues. Back home in China, he's accepted the time-consuming task of hunting down the top-notch talent Google needs in what the industry calls “the toughest foreign market.” 

Lee's responsibilities also include settling media crises, fighting fierce competition, and working hard to improve the market share for Google.cn, which trails far behind chief rival Baidu.com, China's homegrown search engine. (see Sidebar 1) 

Under Lee, Google China's first year was riddled with stormy events. Here's a short review: 

February 2006: Google China is criticized for operating Google.cn by using a Beijing-based company’s Internet Content Provider license, a strategy commonly adopted by other international Web site operators in China, such as Yahoo and MSN. 

April 2006: Google China launches its official Chinese site name Gu Ge, which means 'song of grain' in Chinese. The awkward name caused a furor among Google’s super fans, nicknamed Gfans. Soon, a Web site titled “No Gu Ge” was launched and attracted thousands of hits. 

December 2006: Google China’s sales and marketing president, Xiaoning Chou, resigns after headquarters turns down his proposal. 

April 2007: Chinese portal Sohu.com accuses Google China of intellectual property rights infringement. According to Sohu.com, Google China’s most recent product for Chinese character input software used its glossary database. A week later, Google China apologizes. 

Amid this stream of negative news, how could Lee -- a scientist-turned-entrepreneur -- keep his balance? 

For one thing, Lee did not focus solely on profit margins. “I never read the monthly financial report about us mailed from headquarters,” he admitted. 

Instead, Lee relied on skillful communication -- a tool he's used often with success. For example, he convinced Schmidt that patience and long-term commitment are keys to opening China's door -- a conclusion Lee reached after analyzing why other international Internet players failed in China. 

Schmidt was sold. “China is a nation with 5,000-year history,' the CEO said. 'That could indicate the duration for our patience.”  

Lee understands that, at this point in Google China's progress, Schmidt is concerned about 'nothing but' the growing head count. 'Then follows his second-year question about how much we’ve achieved in R&D development,' Lee said. 'Data on Web page hits is after that. And probably in our fourth year, we need to talk about our earnings.”  

Lee has launched an ambitious program to recruit talent. His assistant, Tao Ning, said the company currently plans to boost the workforce to 250 employees this year and add 'a minimum of 100 to 150” annually. 

More than 120 engineers had joined Google China as of May. They comprise the company’s largest, foreign R&D team.  

So far during the headhunting process “almost none turned us down,” Lee said. 

Schmidt has a favorite story that sheds light on why Google attracts many of the best and brightest. He tells about a hesitant Chinese applicant who was torn between the job offer and relatives who thought Google China was too young. A day after the offer was accepted, Lee personally invited the family of the new employee to dinner and briefed them on the company's mission in China. 

But while expanding the company's manpower, Lee keeps one hand on product development. 

After being pounded by Baidu.com’s promotion efforts, including nationwide advertising that boasts the domestic search engine's understanding of the Chinese market, Google chose to concentrate on improving its search services. The goal was to meet local needs rather than rush to introduce new products to compete with Baidu.com. 

“We invested 70 percent of our manpower into this sector,” said Wang Jin, technology supervisor for Google China. 'We set up a user database, even including a psychologist, to collect regular feedback so as to help us understand Chinese needs.” 

To Lee’s delight, the startup efforts recently started paying off. 

The latest data from Alexa, an Internet research company, shows a marked increase in Chinese viewership in 2007 for Google.com and Google.cn. By early spring, Google.cn had clawed its way to 61st place among global search engines, up seven notches from three months earlier.  

Then on April 23, Google.cn suddenly jumped to No. 33. Meanwhile, Baidu.com stood at 7th place globally, three notches below its position just three months earlier. 

In the first quarter 2007, Baidu.com lost 28 percent of its viewers, despite the search engine's popular distribution of software. 

So far this year, Google has launched nine products in China, including a mobile search feature. That compares with four new products from Baidu.com. 

Google China is also turning to aggressive marketing. It recently announced a plan to share advertising revenue by cooperating with hundreds of Web sites affiliated with China Telecom. A source told that “there is more to come from Google China.” 

Apparently, Google China is ready to turn a corner in the Chinese market. However, questions remain about the company's direction. Will it operate with limited decision-making from headquarters, as the owner of an independent license, or by fostering closer relations with the Beijing government? Will Google win in China with Lee at the helm? 

Time will tell. But there's no doubt that a full-scale war between Internet giants is now under way in China.  

English version by Yu Min and Eric Johnson