Microsoft, Google duke it out for China

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"Part of the speculation is, does Google want Baidu so it doesn't censor listings on the flagship Google site," Sullivan said.

Google also opened a sales office in mainland China roughly six months ago, and has business partnerships with the Beijing-based gaming company Netease.com and the instant messaging company Tencent Holdings of Shenzhen.

Still, Google, Microsoft, Yahoo and others face many challenges operating in China without drawing the ire of the Chinese government. Google's site, for example, was blocked several times in 2002 by the Chinese government, which has asked it to censor search listings. Google has agreed to filter some news headlines in the country. Other challenges could include a relatively weak banking system, inflation and poor intellectual-property laws.

The American Internet companies also have local competition in the Middle Kingdom. Baidu.com for example is the largest search company in China, followed by Google, Yahoo and China-based Sohu.com. Sina is the largest portal site in China and has a deal with Yahoo for an online auction house. Yahoo China president Zhou Hongyi resigned last month for personal reasons, leaving the future of the portal's unit in question.

Sullivan also said Google may be losing ground in China to Baidu.com, citing research from one outlet overseas that claims Baidu.com commands roughly 30 percent of the marketplace and Google has 25 percent.

Of all the major American Internet companies, MSN has the smallest presence, Rashtchy said, but its IM client is second only to China's Tencent in the Chinese workplace.

Because China is such a fast-moving and populated marketplace, analysts say U.S. companies must establish a significant presence in the country if they want to thrive there. According to China's People Daily Online, Google was once the dominant search engine in China, but it lost market share to Baidu.com because it wasn't focused enough on the local market.

"For Google, the whole idea is that they can't do everything from Silicon Valley if they are a global outfit. To them, China is a big market, but they must develop features from China," said Rashtchy.

The search companies aren't the only tech-savvy Americans racing into China, of course. On Tuesday, Silicon Valley venture capitalist Accel Partners said it partnered with the media company International Data Group to form a $250 million fund to invest in Chinese tech companies. Others, including Intel, have established similar funds to take advantage of China's booming technology, gaming, broadband and cellular markets.

Meanwhile, a growing number of Chinese companies have gone public on U.S. exchanges in the past two years, some with strong results. Shanda Interactive, a gaming company, has seen its stock go from $11 per share at its initial public offering in May 2004 to more than $39, a return that's on par with Google's.

But clearly, Google is Microsoft's toughest competitor when it comes to hiring top engineers and perhaps the biggest threat in years to the Redmond, Wash., company's tech domination. And the toughest fights to come may take place on the other side of the world from the companies' headquarters.

"It's almost like the United States and the former Soviet Union launching missiles at each other," said Sullivan, "and Yahoo's like Canada."

[Scott W]

gooooooooooooogle

GO GOOGLE GO!!!!!!
i want to see the MS domination pwned :p

[Christopher Hall]

I got something different out of the article

This is the search wars, only it's in a largely unrealized market.

The "pwnage" you want so badly is already realizing itself quite well in the US with Google the clear leader in the search wars. Google has reminded us that the company that continues to innovate will always be profitable.

[alucinor]

MS to lose?

I would've been skeptical of anyone telling me that with all their billions of dollars, MS could be outdone by any company.

But what good is money when all your talent is leaving?

[alucinor]

They're suing to discourage more defectors

If MS hadn't sued this guy, you know more and more of its execs and top engineers would (and maybe still will anyway) flock to Google. They see potential there, and though there's innovation at MS, it seems they either surpress or can any project that could potentially draw their tech focus away from Windows -- a sinking ship, almost "legacy" in most people's minds these days.

Non Competing Contracts

Regardless of company. Non Competing Contracts used to coerce employees into staying onboard is wrong. We do not support endentured servitude in this country. If a company cannot afford to provide a workplace that will keep it's important talent, then it is in the wrong business.

[pythonhacker]

MS's days are over...

MS and its "innovations" are rightly entering
a downward spiral because of their high costs,
strict licensing, lock-up business model and
insecurity.

Google is attracting top talent these days
because they actually innovate and bring their
solutions to the market at a faster pace than
MS. MS is recycling old technologies, putting
eye-candy on them (Longhorn ?) and trying
to market them as "innovated products". However
with the success of FOSS and Linux, people's
awareness about security and software has risen,
causing these tricks to backfire.

We are seeing only the beginning of a trend
that I suspect is going to continue. MS is
going to loose more and more good people to
innovators like Google, if they don't get down
from their high horse and *actually* start
developing some technology that matters in this
Internet age.

[technewsjunkie]

HYPOCRITE: MS Researchers are Knowlege workers!

"As former director of Microsoft's China laboratory with 380
researchers,..."

I recently read and article on News.com quoting Bill Gates as saying
MS doesn't offshore thier (highly paid) knowledge workers!

LIAR!