Google soars, Baidu falls as China renews ICP license

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By Charles Smith | July 9, 2010 2:58 PM BST

Google soars, Baidu falls as China renews ICP license

nternet search engine giant Google Inc. (NASDAQ.GOOG) scored a victory over its Chinese rival Baidu Inc. (NASDAQ.BIDU) when it announced, Friday, that the mainland government has renewed its Internet Content provider (ICP) license, allowing it to operate its website in the country. Had Google exited China, it would have benefited Baidu, lifting its sales and market share.

Google on Friday said in its official blog site that they "look forward to continuing to provide Web search and local products to our users in China."

Market analysts said Google's announcement of ICP license renewal has dealt a blow to Baidu. At 9.54AM, shares of nasdaq-listed Google were trading up 1.99 percent at $465.40 while shares Baidu's US-listed shares were trading down 1.35 percent at $71.45 on the bourse.

Ever since Google locked horns with the Chinese communist government in January, the world's No.1 Internet search engine giant's user traffic in China has fallen, hurting its revenues while Baidu had benefited.

Baidu CEO Robin Li naturally acknowledged that Google's "semi-exit" from China had benefited his decade-old company. While the company's first quarter sales more than doubled, Baidu predicted that its second quarter sales will rise to between 1.83 billion yuan ($270 million) and 1.87 billion yuan. In fiscal year 2009, Baidu had reported revenue of 4.45 billion yuan.

 

[longbow]

As your post points out. It is all about $$$. Google backed down and in exchange they got to play in the lucrative China market. I had thought that Google would be more principled. But they humbly backed down regardless of how they spin it.

Looking forward, each year they have to renew the license. And as they watch they market share grow, the more they are sucked into the Chinese market. In 3 years they would be kissing toes to renew license because 30% of their revenue will be from China. At that time who knows what Beijing will want from Google. Perhaps a stake in Google China?

Case in point. GM started off with a 51/49 JV with SIAC. A few years later when Chinese market took off and GM executives in Detroit had their tongues drop to the floor because of Chinese sales, SIAC asked for that controlling stake. What is GM to say? Yessss. Beijing holds the cards and it it their market. Well GM sold off that controlling stake for $100M (peanuts right).

Do you know that GM Beijing is owned and majority controlled by a Chinese company. GM beijing has larger sales than GM USA and it is owned by SIAC.

In a way, entrant of Google is good for Baidu. It is going to be a long slog but competition weeds out the weak.