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Last week in China – Baidu Censors Competition, Yahoo Wins and More eBay

The big news last week was about eBay China deciding to give up on their own business by selling the majority to Tom Online.
Many articles have been published about this in the last couple of days, all mentioning the need to localize/partner when you want to do business in China.

More about that later. Let’s first see what else happened in China last week.

Baidu Censors Competition

According to a leaked email from Peter Wang, Brand Director of Baidu, it seems the biggest search engine in China likes to adjust rankings.

From the China Web 2.0 Review

In the email [to Robin Lee, CEO of Baidu], Peter asked for the approval to change the rank of Sina and Sohu [2 major Chinese web portals]. He said Baidu had decreased the rank of Sina previously since Sina published many negative reports on Baidu. So in many search results, the results from Sohu were ranked higher than those of Sina. But recently Sohu is not friendly to Baidu. So he, also requested by an editor of Sina, thought it was time to renew the rank of Sina and decrease that of Sohu.

It’s interesting to have this out in the open. Baidu already mixes organic search results with paid listings and apparently you must be talking sweet too.

Yahoo wins lawsuit from Qihoo over unfair competition

Qihoo is a startup Web 2.0 search engine, run by Zhou Hongyi. Zhou is a former Yahoo employee who sold his Internet search business to Yahoo in 2003 and worked there until Alibaba took over the Yahoo’s China operation.

What was the case about. From the Washington Post

Yahoo China’s suit had claimed that Qihoo’s 360safe software prompted users to uninstall the Yahoo Toolbar by making users believe the toolbar was ‘malware’ — software that users download unknowingly and is difficult to remove.

Beijing’s Second Intermediate Court ruled that Beijing Sanjiwuxian Internet Technology, operator of the Qihoo search engine, must stop competing unfairly and compensate Yahoo China for damages and legal costs.

Qihoo will appeal.

Is Paypal China partnering up as well?

According to Forbes it is.

US auction company eBay Inc may partner its PayPal online payments service with a local Chinese entity should it be required by local regulations, chief executive Meg Whitman said.

We will see what the right thing to do is here in the People’s Republic of China, I am aware of some of the pending government regulation around the need to find a local partner for a financial-services product,’ Whitman said.

‘But we continue to invest in PayPal and the cross-border trade is very strong and the local trade is very strong, so we will see what happens over the next weeks and months, but we are very committed to PayPal in China,’ she added.

The rumor is that UMPay, a joint venture between China Mobile and bank card provider China Unionpay will be the partner but no confirmations yet.

Which brings us back to the ‘forced’ need to localize/partner in China in order to become a real player in the market.

Localizing is definitely a good thing when it means making your products appealing enough for the Chinese customer and understanding what they really want. A part of the reality though is that even if you localize well, Chinese companies may still be favored, not merely by users but also through government policies.

Partnering up like Yahoo before and now eBay have done seems then to be an ever better bet as it presumably gives easier access to political connections and the companies may be favored as they’re more Chinafied. In the case of Paypal it may even be the only way when the regulations force them to.

But political connections may not be the business savior as Seeking Alpha points out.

If connections are the magic pill for doing business in China and is all that left eBay from making money here in the first place, why is TOM Online with all of their backing still a 3rd tier if that portal?

…. While business relationships are important here, they are not enough anymore to ensure business success. As China’s markets mature, relationships here take on the same importance as relationships in the US. Having them is helpful, but having them alone is worthless.

Political connections cannot help a poorly run business suddenly become profitable.

via China Herald

Another thing I’m still not convinced about is whether in the long run this may put the Yahoos and the eBays of this world offside in China, as they’re not in control anymore.

Wish you all Happy Holidays from Shanghai.

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Gemme van Hasselt is an Internet Marketing Consultant, living in Shanghai, China.

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3 thoughts on “Last week in China – Baidu Censors Competition, Yahoo Wins and More eBay

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  2. Excellent post Gemme. With the Chinese government holding on so tightly to the web it will be nearly impossible for a foreign company to truly be successful in China without a good partner. Of course they have to be a viable business in the first place as you point out. Google’s missteps aren’t helping any and their go it alone attitude may have to change if they expect to compete. Another good point you make is that Yahoo and Ebay aren’t in control anymore but they are in China and after all isn’t that the a good thing?