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Google shifting gear in China -- buys stake in Xunlei

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Yesterday, Google Inc. (NASDAQ:GOOG) announced it had reached an agreement with China Mobile to offer mobile users Internet search services. Today, the world's largest search engine, said it is partnering with a Chinese venture capital firm to buy a stake in China's Xunlei Network Technology Co., a file-sharing provider among other services. The details might be announced soon.

Xunlei is reported to have more than 50 million visitors a day and 80 million users who have already installed the company's software. Google will provide its search technology to services offered by Xunlei.

These recent steps taken by Google definitely show that China is becoming a priority and a focal point for the search giant. Up until now, most western companies have had considerable difficulties breaking into the Chinese Internet market. Yahoo! Inc. (NASDAQ:YHOO) gave up control as it bought a 40% stake in Alibaba; eBay Inc. (NASDAQ:EBAY) recently made a similar deal with Tom Online Inc. (NASDAQ:TOMO).

As far as Internet search goes, Baidu.com Inc. (NASDAQ:BIDU) is said to have 57% to more than 60% of the Chinese market while Google has only 16% of that market.

With Google holding a commanding (and ever increasing) lead in the North American Internet search market, its market share growth rate could begin to dwindle soon as it captures most of the market. Google is no doubt looking for other growth opportunities and what better than the second largest Internet market (in terms of users) in the world? With that in mind, Google's latest actions in China make perfect sense.

Question is -- can Google do what others have failed to do to it and beat Baidu -- "the Chinese Google"?

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Last updated: July 06, 2009: 08:03 AM

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