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September 11, 2009

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Google steps on the expansion pedal

ONE week after the news of the departure of a high-profile president from its China arm, Google Inc said it will double its sales staff in China and provide 50 million yuan (US$7.35 million) worth of incentives to 100,000 small start-up companies to advertise online.

The announcement of the plan to expand in the world's No. 1 Internet market came after Google China President Kai-Fu Lee said he would leave the firm in mid-September to operate an 800 million yuan fund that would invest in technology start-ups.

Some analysts have expressed concerns that the loss of Lee may jeopardize Google's business in China, a country with more than 300 million Netizens.

"In our view, Lee's departure and the ensuing management transition may create near-term challenges for Google and thus indirectly benefit Baidu," said Richard Ji, an analyst of Morgan Stanley.

"Lee did a good job in founding Google China," said John Liu, Google's vice president of China sales and operations.

"It's time for us to explore the market," said Liu, who will take over part of Lee's responsibilities. "Google's leading technology and service won't change."

Under the 50 million yuan incentive program, Google will provide 500 yuan to every new registered customer of Adwards, its popular online search advertising tool.

Google will continue to grow rapidly in China through the incentive program and new products such as advertising tools on mobile phones, the company said.

China is the world's biggest mobile phone market with more than 700 million handset users, double the population of the United States.

Google China's expansion strategy calls for sales and promotion staff to be doubled, said Liu. Even with the bigger number of employees, it will still trail Inc whose payroll numbers are in the thousands.

During Lee's tenure, Google's share of China's search market by revenue grew from 16 percent in 2006 to 29 percent at the end of the second quarter this year. On the other hand, Baidu's market share totaled 61.6 percent at the end of June, according to Analysys International.



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