Unfortunately, Yahoos China business proved more difficult than his prior ventures, and was not without missteps. Mas acquisition ended Yahoos promising joint search engine development with Sina.com. It drove away key engineers from 3721.com core technology (who defected to Zhou Hongyis Safeguard 360) and it ended up handing most of their market share to competitor Baidu, who advanced to 53 per cent of Chinas search market share by the end of 2007. And things got even worse for the US search giants.
Battle on the Great Firewall
Prior to Lees founding of Google China in 2005, the US-based Google.com had only been accessible 90 per cent of the time, but a number of services were not available at all (Official Google Blog: Google in China, January 27, 2006). Unfortunately, founding Google China did little to improve the situation. Alan Guo, chief strategy officer at Google China, reports that by September 2005, Google Chinas search share had dropped 18 per cent.
Googles efforts to comply with Chinas Golden Shield Project (a.k.a. the Great Firewall) were disastrous. Browsers would lock up for several minutes after they tried to search with keywords banned by the Chinese government. If more than one user shared an IP address, all would lose access, and statistics showed that 5-10 per cent of its users at any time were prevented from using Google.
Many of these technical problems arose from Googles insistence on having one common indexing database around the world, rather than redirecting to a local Chinese index. Unfortunately, the tensions throughout 2006 took their toll on Google, which had to worry about shutting down, and the ministry of information licensing throughout the year. They temporarily used Ganji.coms licence until 19 July 2007, two years after Lee joined Google, when he finally made the announcement that Chinas ministry of information had granted it a licence to operate.
Googles Great Firewall problems provided a welcomed respite to competitors Tencent, Baidu, and even to Alibaba. But after receiving the licence to operate in China, Google refocused on its core competence, delivering a great search experience with measurable results. Id have been dead if I had been asked to start to try social network services, Lee joked.
This quickly paid off. Baidu found it more and more difficult to scale its manual optimisation procedures, while Googles automated and scalable results got better and better. Google quickly expanded its reach and offerings through partnering with Sina, China Mobile, China Netcom, and Tencent, along with vertical sites.
These days, Googles biggest obstacle in China may not be Baidu, but rather Mountain View, where Googles headquarters are located. Charles Zhang, founder and CEO of Sohu, contends that none of the global Internet companies can excel, because of their long decision chains and lack of local prospective. Lee agrees. He had some success in dragging people out of Mountain View and redirecting them to that unique icon of the Chinese Internet, Chinese Internet bars. Conveying the importance of this unique Chinese institution between Beijing and Mountain View became Lees obsession.
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