Google shifting gear in China -- buys stake in Xunlei

Posted Jan 5th 2007 9:31AM by Melly Alazraki
Filed under: Deals, Industry, Consumer Experience, Competitive Strategy, Google (GOOG), Yahoo! (YHOO), eBay (EBAY), China

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"?

Tags: baidu, bidu, ebay, goog, google, tom online, TomOnline, Xunlei, yahoo, yhoo

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Reader Comments (Page 1 of 1)

1-08-2007 @ 4:32PM

Blaze Fabry said...

I agree, Baidu has great potential. I read the Google/Xunlei coop but I think investors should seriously consider Baidu. Actually read the following sotry from Chinavestor's http://chinavestor.com Newsletter. It's very relevent!

Remember, current stock prices reflect value of future earnings. As long as the market anticipates future yuan appreciation, the valuation of the Chinese banks will remain high.
Another excellent example of potential future earnings is Baidu.com (BIDU), the number one Chinese search engine company.
As the following screenshot displays, Baidu.com has been steadily recovering since February 2006. The company has kept delivering high top and bottom line growth while keeping profitability ratios high and constant. The company solidified its leading position among Chinese language search engines and skeptics in the investment community accepted Baidu’s high valuation. There have been six upgrades by major analysts since May 2006 and the good times seem to keep rolling.
And a recent survey for the “Best International Stocks” of The Motly Fool included Baidu in the group of elite companies like Toyota (NYSE:TM), Sony (NYSE:SNE) and Nokia (NYSE:NOK).
I think we should listen...