April 26,2008

Projected Google-Kingsoft Pact a Threat to Baidu's China Dominance

By CSC staff

Word is out that China's search engine industry is in for a bit of an upheaval. Insiders say that internet giant Google has secretly reached a cooperation agreement with Kingsoft Corporation that may well affect the balance of the industry.

Though currently no comments issue from either Google or Kingsoft, it is predicted that the agreement will be announced around the middle of May. The agreement was reached by Google China president Li Kaifu and Kingsoft CEO Lei Jun.

According to insiders speaking to China Business News (CBN), Kingsoft, a leading Chinese software developer and distributor, will provide Google with its Kingsoft Powerword, an online translation tool and one of its flagship products.  Google also hopes that the cooperation can include other office applications software, such as WPS Office and Kingsoft Internet Security, two popular products.

As recently as February, Kingsoft had joined with Baidu, China's largest internet search provider and thus a major Google competitor, in rolling out Baidu Security Center, a system Baidu provides free to its users that protects them from viruses and spyware.

This is all great for Kingsoft's profile, with both Google and Baidu competing for the chance to cooperate with the company.

Sources said that once Kingsoft begins its cooperation with Google, Kingsoft Powerword will become a free service and its name will be changed to Google Powerword. Google will inherit Kingsoft Powerword's users and will compensate users who have been paying for the service for the last eleven years.

Google will most likely probably provide the service to its customers through online Q&A and customer end software. Lu Bowang, chief analyst of Zhengwang Consulting, said that the cooperation with Kingsoft will not only compensate for Google's weakness in dictionary and customer Q&A machine translation, but will also strengthen Google's ability in English and Chinese information search.

"Google's present translation capability is only at the stage of main meanings. This kind of machine translation will not reach the level of human language in three or even five years." said Lu.

Visits to Google have been increasing rapidly, yet its customers amount to only 1/3 of Baidu's. With the help of the more than 30 million customers of Kingsoft's Powerword its search engine market share is expected to balloon. Chinese-English translation has become the most important service for the search engine industry, and adding 30 million new customers will nicely affect Google's advertising revenues. Lu Bowang believes that with Google providing a decent translation service, many customers using both Baidu and Google or using Baidu alone will change over.

As today's Chinese-English and English-Chinese dictionaries lag behind the current language by 7-8 years, some by even 20 years, and new words are coined every day, Chinese-English translation has become a basic service an internet search engine must provide, and more and more search engine companies realize its importance.

Youdao, a translation software developed by Netease, has been downloaded more than 2 billion times in four months.

According to Baidu chairman Robin Li Yanhong, Baidu Zhidao ("Baidu knows") has became the most popular online question and answer platform on the Web and one of Baidu's core products. More than 10 million Chinese speakers use this platform everyday. Half of Baidu's users go to Zhidao, more than go to Baidu Tieba, one of the China's largest online communities.  And Zhidao's popularity is now nearing that of Baidu's MP3 search.

Meanwhile, Kingsoft is pressing on with its own strategic transformation. On the one hand it is working as an internet software provider, while on the other it wants to enhance its online game service.

Since 2006, Lei Jun, who resigned as CEO in December, had pushed Kingsoft towards becoming an internet based company and called for the firm to learn from Google. Since Qiu Bojun, founder and chair of Kingsoft, took over the post, more effort has been devoted to internet services. According to a 2007 financial report, subscribers of Kingsoft Internet Security have been increasing at the rate of 1 million per quarter. By the forth quarter, daily online subscribers averaged 7.56 billion.

In China, Kingsoft has been the earliest company to spot the trend of the software industry moving online, and the quickest company to transform itself. After the cooperation between Kingsoft Internet Safety and Baidu, the cooperation between Kingsoft Powerword and Google will not only inject vitality into Kingsoft product line, which has suffered from pirating, but will also give the firm more time to develop its online games.

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