Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

1.8.07: Google in China

Posted by Richard Koman - January 7, 2007

Will Google manage to work its magic on the oh-so-hard-to-crack China market? Internet biggies have floundered and faltered in China - not least over human rights and censorship but, more importantly to them, market share. But Google made two strategic investments in China last week, The Times notes, raising the question: Can Google do what Yahoo, eBay, and Amazon have so far failed to do?

In its latest move, announced Friday, Google struck a deal to invest about $5 million in one of the country’s fastest-growing Internet start-ups, Xunlei.com, according to people close to the deal.

That follows another hook-up this week, when Google said it would team with China Mobile, the country’s dominant, government-owned mobile telephone carrier, to offer mobile search services using the Internet.

Google, by far the dominant search engine in the western world, has only 19 percent of China searches and Yahoo only 7.6 percent. Number one? Baidu.com, with 63 percent of the market, according to iResearch.

Xunlei is a video download service with Silicon Valley roots, so it brings to mind Google's famous acquisition of YouTube.

Xunlei, based in the southern city of Shenzhen, is gaining popularity. It was started by two computer science graduate students from Duke University, Zou Shenglong and Cheng Hao, in Silicon Valley in 2002. Mr. Zou had previously worked as a technician in Silicon Valley and Mr. Cheng was once a senior manager at Baidu. After getting $20 million in venture backing from Morningside Ventures and IDG VC Partners and moving the company to China in 2003, Xunlei.com seems to have great promise.

Officials at Xunlei.com say that more than 120 million people have used its software, and the company has also signed up some major advertisers, including KFC and Motorola.

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