Rumors have been flying about Google’s future in China ever since the company’s China head, Kai-Fu Lee, resigned in early September to start an incubator lab in Beijing. His departure seemed awfully abrupt.
Lee scurried to set up an office for his incubator, raise a fund and assemble a team from thousands of job seekers. Lee’s PR reps in China and the Valley hyped his new project as his fulfillment of a dream to coach young Chinese entrepreneurs and support their best start-up ideas.
My venture investing sources in Beijing and Shanghai suspected then that there was more to Lee’s departure than was being told. Maybe Larry Page and Sergey Brin want to exit China and Lee knew this, my sources speculated. Certainly, the rush to the exit door by Google ( GOOG – news – people ) staff in Beijing since September suggests that.
Indeed, Google has been trying to become the top search engine in China for nearly a decade, without success. Google hasn’t said it is shuttering its local operations in China, but the company plans to power its Chinese search business from its Mountain View, Calif., headquarters.
Why did the mighty Google fail in China? For years, the company fumbled with inferior search results and unreliable service, not to mention censorship issues and that annoying upstart Baidu, which raced ahead with innovative technology that had a search algorithm for generating results that were more relevant in Mandarin.
To compete with Baidu head on, Google set up business on Chinese soil, recruited former Microsoft ( MSFT – news – people ) exec Lee, and began to gain traction. Lee hired more than 100 Beijing-based engineers and linguists. The effort moved the needle on Google’s market share to 31% in 2009 from 21% in 2007.
http://www.forbes.com/2009/12/21/google-baidu-internet-intelligent-technology-fannin.html?partner=asia_newsletter
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