Mr. Lee said in an interview Thursday that the nine companies raised an average of $8 million each and have an average valuation of $40 million. “The Chinese Internet will undoubtedly grow in usage, mobility, monetization, e-commerce—all faster than the U.S. market, so this is clearly one of the best investment opportunities,” he said.

But the sector has been confronted recently by growing concerns about a possible bubble in Chinese tech stocks, worries about the regulatory environment in China, and broader concerns over corporate governance practices at smaller Chinese companies.

A string of new Chinese Internet listings in the past year have performed badly. Shares in social-networking site operator Renren Inc. are now trading on the New York Stock Exchange around half their initial public offering price in May, and NYSE-listed stock in online-video company Youku.com Inc., which more than doubled on their first day of trading in December, are now back below their IPO price. Shares in Nasdaq-listed Tudou Holdings Ltd., a Youku competitor that listed last month, closed on Wednesday 10% below their offering price.

These companies, as well as China’s top Internet companies including Baidu Inc., Tencent Holdings Ltd. and Sina Corp., have multi-billion dollar valuations comparable to some U.S. Internet companies, despite competing for significantly less market revenue. Total revenue from online ads in China reached $4.3 billion last year, according to research firm Analysys International. The U.S. online ad market last year reached $26 billion, according to research firm eMarketer.

The Wall Street Journal blog points out that Lee’s success in raising investment is all the more remarkable considering widespread concern that China’s Internet sector is experiencing a bubble:

Mr. Lee said in an interview Thursday that the nine companies raised an average of $8 million each and have an average valuation of $40 million. “The Chinese Internet will undoubtedly grow in usage, mobility, monetization, e-commerce—all faster than the U.S. market, so this is clearly one of the best investment opportunities,” he said.

But the sector has been confronted recently by growing concerns about a possible bubble in Chinese tech stocks, worries about the regulatory environment in China, and broader concerns over corporate governance practices at smaller Chinese companies.

A string of new Chinese Internet listings in the past year have performed badly. Shares in social-networking site operator Renren Inc. are now trading on the New York Stock Exchange around half their initial public offering price in May, and NYSE-listed stock in online-video company Youku.com Inc., which more than doubled on their first day of trading in December, are now back below their IPO price. Shares in Nasdaq-listed Tudou Holdings Ltd., a Youku competitor that listed last month, closed on Wednesday 10% below their offering price.

These companies, as well as China’s top Internet companies including Baidu Inc., Tencent Holdings Ltd. and Sina Corp., have multi-billion dollar valuations comparable to some U.S. Internet companies, despite competing for significantly less market revenue. Total revenue from online ads in China reached $4.3 billion last year, according to research firm Analysys International. The U.S. online ad market last year reached $26 billion, according to research firm eMarketer.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Googlecn, IT industry, kai-fu lee, lee kai-fu
Download Tools to Circumvent the Great Firewall

The tough warning appeared in the overseas edition of the People’s Daily, the leading newspaper of China’s ruling Communist Party, indicating that political tensions between the United States and China over Internet security could linger.

Last week, Google said it had broken up an effort to steal the passwords of hundreds of Google email account holders, including U.S. government officials, Chinese human rights advocates and journalists. It said the attacks appeared to come from China.

The Chinese Foreign Ministry rejected those accusations, and the party newspaper warned Google against playing a risky political game.

By saying that Chinese human rights activists were among the targets of the hacking, Google was “deliberately pandering to negative Western perceptions of China, and strongly hinting that the hacking attacks were the work of the Chinese government,” the People’s Daily overseas edition, a small offshoot of the main domestic paper, said in a front-page commentary.

“Google’s accusations aimed at China are spurious, have ulterior motives, and bear malign intentions,” said the commentary, written by an editor at the paper.

See also: “To: Defense Contractors; Subject: Tell Us Your Secrets” and “Cyberspies Target China Experts” from the Wall Street Journal, about phishing schemes which have ensnared U.S. defense contractors.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Google, Googlecn, hacking, phishing
Download Tools to Circumvent the Great Firewall

There were missteps from the start. When the Google founders, Sergey Brin and Larry Page, visited China in 2004, they needed coaching on how to behave, Mr. Levy writes. On a visit to India, they had been compared to college backpackers, riding in rickshaws. Al Gore, the former vice president, had to warn them that they were politically naïve and that the Chinese would think they were arrogant if they acted like that in China.

Many Chinese Internet users preferred the search engine Baidu out of patriotism, and the government even redirected traffic from Google to Baidu, according to Mr. Levy. Google never figured out how to manage business customs in China. It fired the head of government relations in China after she gave iPods to Chinese officials, which she charged to her Google expense account.

Google itself made it hard for its workers in China to succeed, Mr. Levy writes. It refused to grant the money to advertise in China, and the founders never visited the country once Google opened an office.

But one problem was bigger than all the rest, according to the book. Though Google prides itself on giving engineers access to its code base to invent new products, it blocked the engineers in China because it said government officials might force them to reveal private information. Experienced engineers, who felt distrusted, could not work on new products and had to spend time on tasks like testing Google searches, something that less-qualified people do at other Google offices.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: book reviews, foreign IT companies, Google, Googlecn
Download Tools to Circumvent the Great Firewall

Chinese tax authorities have found three local companies owned by U.S. search giant Google Inc. engaged in “tax-related illegal behavior,” the Economic Daily newspaper reports Thursday, citing “relevant departments.”

A Google spokeswoman confirmed Google owns the companies.

The company said in a statement: “We believe we are, and always have been, in full compliance with Chinese tax law.”

The problems at the “Google enterprises in China” included using fake receipts and reporting unrelated spending as costs, such as for massages, and involved a total tax value of more than 40 million yuan ($6.1 million), the newspaper reports.

The three companies are Google Information Technology (China) Co., Google Advertising (Shanghai) Co., and Google Information Technology (Shanghai) Co., the paper reports.

The Wall Street Journal also reports on Google’s apparent demise in China:

The developments are the latest signs that significant parts of Google’s business in China, home to more than 450 million Internet users, have been unraveling since last March. It was then that Google replaced its self-censored China search service with an unfiltered version based in Hong Kong, citing censorship and cyberattacks that the company said were traced to Chinese hackers.

The company’s share of search market revenue in China dropped to 19.6% last quarter from 35.6% a year earlier, or just before Google’s announcement, according to research firm Analysys International.

Chinese rival Baidu Inc. has thrived in the wake of weakened competition from Google, increasing its share of search market revenue to 75.5% in the fourth quarter from 58.4% in the last three months of 2009, according to Analysys.

Meanwhile, Android phones shipped officially in China from Motorola Mobility Holdings Inc. come pre-installed with links to search products by Baidu and Microsoft Corp.’s Bing, but not Google.

Yet a Google representative insists the company is still competitive, and expanding, in China, BBC reports:

Google says reports of its pulling back from China have been ‘greatly exaggerated’, as a deadline looms for its mapping service to continue in the country.

“Stories of Google’s withdrawal from China are greatly exaggerated,” said Andrew McGlinchey, Head of Product Management for South East Asia.

He added that Google was actually expanding its offices in the country.

Google has previously faced censorship issues and cyber attacks in China.

See also a Xinhua report about Google’s tax evasion charges.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: foreign IT companies, Googlecn, tax evasion
Download Tools to Circumvent the Great Firewall

Google would not comment directly on the Sina news, but spokeswoman Christine Chen said “We have had a number of syndication deals with partners in China, and have honored our contractual obligations to them. While we can’t comment on specific partnerships, we announced last year that over time we would not be syndicating censored search to partners in China after fulfilling our contractual commitments.”

Similarly, a Sina spokeswman told AFP, “Our contract (with Google) ended this month and the whole websites are now using our own search technology.”

Sina’s move follows in the footsteps of Tom Online, a Hong Kong-run Internet content provider that severed ties to Google in March 2010. Last week Google accused the Chinese government of disrupting access to Gmail in order to prevent anti-government protests, which the Foreign Ministry vehemently denied.

In a country with the world’s largest Internet population – 389 million according to the CIA’s last count – Google, the leading search engine in the U.S., has watched its Chinese market share fall below 20 percent in December.

Also, the future of Google’s online mapping service in China is at risk as the company has reportedly not filed an application to renew their permit to operate. From Business Week:

As of yesterday, China’s State Bureau of Surveying and Mapping hadn’t received an application from Google to keep offering its service, as required under regulations announced in May, according to Kou Jingwei, the bureau’s spokesman. Jessica Powell, a Google spokeswoman, declined to comment on whether the company has applied. The deadline is tomorrow.

As Baidu Inc. widens its lead in the world’s largest Web market, a discontinuation of the mapping service would signal Google’s dimming outlook in China, according to analysts, after the company blamed local censors for disruptions in its e-mail service. The latest clash shows the government hasn’t forgiven the Google’s decision to halt compliance with censorship rules on Internet searches, said Christopher Tang, a professor of business administration at UCLA.

“Google faces major problems within China,” Tang said. “Unless Google is going to change the way they operate, unless they are willing to apologize to the Chinese government, unless they are willing to cooperate with the Chinese government to impose censorship according to the wishes of the Chinese government. Otherwise, there’s no deal.”

Read more about Google in China via CDT.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: foreign IT companies, Googlecn, internet search, sina
Download Tools to Circumvent the Great Firewall

A host of evidence over the past several weeks shows that Chinese authorities are more determined than ever to police cellphone calls, electronic messages, e-mail and access to the Internet in order to smother any hint of antigovernment sentiment. In the cat-and-mouse game that characterizes electronic communications here, analysts suggest that the cat is getting bigger, especially since revolts began to ricochet through the Middle East and North Africa, and homegrown efforts to organize protests in China began to circulate on the Internet about a month ago.

“The hard-liners have won the field, and now we are seeing exactly how they want to run the place,” said Russell Leigh Moses, a Beijing analyst of China’s leadership. “I think the gloves are coming off.”…

Several popular virtual private-network services, or V.P.N.’s, designed to evade the government’s computerized censors, have been crippled. This has prompted an outcry from users as young as ninth graders with school research projects and sent them on a frustrating search for replacements that can pierce the so-called Great Firewall, a menu of direct censorship and “opinion guidance” that restricts what Internet users can read or write online. V.P.N.’s are popular with China’s huge expatriate community and Chinese entrepreneurs, researchers and scholars who expect to use the Internet freely…

Beyond these problems, anecdotal evidence suggests that the government’s computers, which intercept incoming data and compare it with an ever-changing list of banned keywords or Web sites, are shutting out more information. The motive is often obvious: For six months or more, the censors have prevented Google searches of the English word “freedom.”

See also “Google’s China problem” from the Global Post. In a blog post translated by Shanghaiist, prominent sexologist Li Yinhe expresses her exasperation at Internet censorship:

Yesterday, I found myself suddenly unable to send emails, but had no problem receiving emails. After looking through my email settings multiple times, I could find absolutely nothing wrong and as a last resort, I decided to call up the 263.com customer service. On the other end of the call was a polite male voice, who requested that I give him the error number, which I did. The troubleshooting took no time. He asked, “Can you see if your email has the following three English letters — ‘s’, ‘e’ and ‘x’?” I was flabbergasted beyond words. This was a business email discussing the publishing of the works of renowned German sexologist Erwin J. Haeberle in China — of course there was the word “sex” in it. Be that as it may, we finally spotted the reason, and I was able to send the email as soon as I deleted the word “sex”.

My God. Mamma mia. I really don’t know if I should cry or laugh. Our internet censors have gone crazy, but they really shouldn’t be driving us commonfolk crazy too.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Googlecn, Internet censorship, VPN
Download Tools to Circumvent the Great Firewall

In Tuesday’s episode, Will asks for Alicia’s assistance with their latest client, a Chinese dissident named Shen Yuan. Imprisoned and tortured for five years, Shen Yuan is suing an American search engine with the unfortunate name of “Chum Hum” for turning over his IP address to the Chinese government. Initially, Will just wants Alicia to sit in on the negotiations — “just look angry and intense” — but clearly, she believes in the cause and throws her best efforts into it. Apparently, Will does too. In a fiery deposition, he attacks Chum Hum’s bestubbled chief executive, Neil Gross.

The deposition as heated-forum-for-contemporary-debate has become a fixture on “The Good Wife,” and this scene is no exception. Neil maintains that, even if his company has to comply with oppressive laws, “American businesses in China help open the door just a little bit.” Will is more skeptical. “It also doesn’t hurt that we also owe them $843 billion.” He also makes fun of Neil for wearing a hoodie in a deposition, a tactic that seemed unnecessarily bullying and snide. The point, I think, was to show us a hint of Will’s dark side.

Given Will’s showy denunciation of Chum Hum, Alicia is especially dismayed to discover that his interest in the case is financial, not humanitarian. She catches Patric Edelstein, the Mark Zuckerberg-esque Internet billionaire we met a few weeks back, in a secretive meeting with Will. She correctly deduces that the goal of the suit is to get Chum Hum out of China, so that Sleuth.com can swoop in and monopolize the growing market. Alicia confronts Will with her suspicions. “I just for one minute wanted to think that we were doing the right thing,” she tells him. Will claims that they are doing the right thing, even if the underlying motive is venal and not altruistic. Alicia’s disappointment intensifies when she discovers that Edelstein also plans to comply with Chinese authorities. “It’s the law,” says Will, dousing Alicia’s crush like a bucket of ice-cold water.

In a remarkably similar real life plot line, Yahoo! settled a case with writer Shi Tao, who was sentenced to ten years in prison for “leaking state secrets” after Yahoo! provided his account details to the Chinese government.

The full episode of The Good Wife can be viewed here:


© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Googlecn, Great Firewall, Shi Tao
Download Tools to Circumvent the Great Firewall

The road to recovery will certainly be a bumpy one, but the Internet giant looks to have enough in place to rebuild its presence in the world’s biggest Internet market with more than 400 million users.

“Do I think they can do it? Yes, the market is still growing very fast, a small piece of the big pie is still a big piece,” said T.R. Harrington, chief executive of search marketing consultancy Darwin Marketing.

China’s search market was worth 11 billion yuan ($1.7 billion) in 2010 and is expected to grow an average of 50 percent each year over the next four years, according to iResearch.

While Google’s share in China’s search arena is set to further decline for a few more years, the sheer size and the rampant pace of growth of the overall market should provide it with enough buffer for now.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: foreign IT companies, Google, Googlecn
Download Tools to Circumvent the Great Firewall

1. Dissidents no longer matter in global diplomacy. Fact: After China joined the World Trade Organization and hosted the Beijing Olympics, the image of the impassioned, ink-stained inmate began to seem as retro as a Cold War spy swap. When the presidents of China and the U.S. convened, they could hardly be expected to have more than a ritual exchange of differing opinions on human rights before moving on to more practical matters of mutual concern. But then the Nobel Prize Committee chose Liu Xiaobo, and, instead of turning a blind eye and ignoring it, China vowed to punish Norway and advised other countries to stay away from the ceremony. Liu Xiaobo, who had been little known beforehand, became famous in China and abroad. China confronted a full-blown diplomatic crisis. (Spy swaps are back, too.)

2. No company can afford to antagonize China. Fact: Google even had a good year doing it.

3. China is parting ways with North Korea. Fact: When a leaked U.S. State Department cable suggested that Chinese diplomats were whispering about the need for change on the Korean peninsula, some in the West saw a glimmer of daylight between the “lips and teeth,” to use the unlovely old metaphor for that special relationship. But the Chinese government contains a large, variegated range of opinion, and for the moment the consensus is far more in favor of protecting Kim as a defense against a refugee crisis and a U.S. troop presence on China’s eastern border.

© Sophie Beach for China Digital Times (CDT), 2010. | Permalink | No comment | Add to del.icio.us
Post tags: Googlecn, Liu Xiaobo, views of China
Download Tools to Circumvent the Great Firewall

Google is trying to balance the loss of search market share after its partial retreat from China by aggressively expanding the business of placing video and banner advertisements on other websites, according to its top executive in the country.

“Over the last 12 months, China has been one of Google’s largest display markets in the world, and it continues to grow rapidly,” John Liu, the company’s vice-president for greater China operations, told the Financial Times.

“Display” refers to Google’s growing advertising network business, rather than to the ads placed next to search results on its own website.

The interview marks the first time that the company has discussed the business consequences of confronting the Chinese government over censorship in January and moving its China web search to its Hong Kong site in March.

It also comes as US diplomatic cables released on WikiLeaks at the weekend highlighted Google’s relationship with the Chinese government again.

© Sophie Beach for China Digital Times (CDT), 2010. | Permalink | No comment | Add to del.icio.us
Post tags: Google, Googlecn, online advertising
Download Tools to Circumvent the Great Firewall