Google Says China Sales Rising as Exit Concerns Ease

Google Inc., which threatened to pull out of China in a dispute over censorship, said its revenue in the country is growing as demand for display advertising and export marketing helps add customers.

“The last 12 months have convinced us about the revenue opportunities the Chinese market holds for us,” Daniel Alegre, the company’s vice president for the Asia-Pacific region, said in an interview today in Beijing. “Display advertising is a large opportunity.”

China is the “heart” of the Internet’s future, where Google can expand services such as maps and display advertising even without a search page, Alan Eustace, senior vice president of engineering and research, said separately today. Google this year fell further behind Baidu Inc. in China after diverting search users to a site in Hong Kong to avoid content rules in the world’s biggest Internet market.

“Not only are we in China, but we are investing heavily in China,” Alegre said. It is a market “we want to remain in.”

Combined revenue in the country from display ads, online search and Chinese companies marketing on Google’s global sites has increased this year, Alegre said, without giving details.

Google lost market share in China this year after the company said in January it would no longer comply with Chinese regulations for local websites to self-censor content.

“Search is only one piece of our business,” Eustace told reporters after the Google Innovation conference in Beijing, where the company showed off new services such as translation tools and a site that helps companies find customers for their products in international markets. “There are lots of areas we can innovate. It’s not a narrow slice.”

‘Solid’ Search Business

Google’s share of China’s Internet search-engine market dropped to 24.6 percent in the third quarter from 26.8 percent the previous three months, Shanghai-based research company iResearch Inc. said in October. That was the lowest level since the fourth quarter of 2007, iResearch said.

Baidu’s market share increased to 72.9 percent in the third quarter from 71 percent, according to iResearch.

Alegre said Google’s search-engine business in China remains “solid,” declining to elaborate.

He Di, a Beijing-based Web designer who attended the Google conference, said he has turned to Baidu more since Google started directing Chinese users to its Hong Kong site.

“Compared to a year ago, I use Google less because the search results and search speed are affected,” He said. “Baidu has launched some new functions that are very convenient.”

‘Force for Good’

The Internet “can be a huge force for good in the world,” Eustace said in a speech. “We’re at the very beginning and China, in my opinion, will lead much of that revolution.” The nation is “the heart of the future of the Internet.”

China’s State Bureau of Surveying and Mapping in May required companies operating online map services in the nation to apply for a license from the bureau to continue business, citing national security.

Companies have until July 1 to apply for a license, the China Daily newspaper reported last month. The government agency in October started a competing service called “Map World.”

Eustace said Google has no first-hand knowledge of claims on the whistle-blowing website, WikiLeaks.org, that China’s government directed Internet attacks against the company.

Hackers backed by Chinese authorities conducted extensive computer hacking on U.S. government agencies and companies, including networks of Google, the New York Times reported.

China renewed Google’s Internet license in July after the U.S. company changed the arrangement used to redirect Internet traffic to its Hong Kong site. A month earlier, Google stopped automatically redirecting users to the Hong Kong site and put in place a so-called landing page that requires users to opt for the alternative service.

--Mark Lee, Edmond Lococo. With assistance from Stephen Engle in Beijing. Editors: Terje Langeland, Suresh Seshadri.

To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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