News came out Friday that Google (GOOG)'s search chief in China, Kai-Fu Lee, was leaving to head a new venture, as reported on DailyFinance. Much speculation about Lee's departure centered on the new venture, but very little focused on what this departure means in real terms for Google.
In a nutshell, it could throw a major wrench into Google's accelerating China strategy. The search giant has long struggled to compete in China. Homegrown competitor Baidu (BIDU) has dominated China's search-engine market, with the government's tacit support. Public sentiment in China strongly favors local companies, regarding Western rivals like Google with suspicion.
And as the U.S. has morphed from global guru to economic basket case, such sentiment has only intensified. Despite Baidu's inferior search results and technology, it wasn't entirely surprising that Google had never exceeded a 25 percent market share in China.
After Lee jumped from Microsoft to Google four years ago, he advocated a slow, patient strategy of penetration and dominance to win China. And there have been a few indications that his strategy -- as well as his persistent improvements to Google's Chinese-language search technologies -- had begun to bear fruit. One consultancy, iResearch, found Google gaining in Chinese ad revenues, as BusinessWeek noted. But in the same measurement period, Google lost Chinese traffic volume to other search engines.
Wall Street analysts, for their part, viewed Google's search deal with China Mobile (CHL), China's largest wireless carrier, as a huge boon that could set a template for future success. A mere week before leaving, Lee confidently touted Google's mobile opportunity in China to The Daily Telegraph.
And then he left. When a man who claims to advocate a long strategy and is acknowledged as an industry visionary jumps ship, he may be seeing something the rest of cannot. It's certainly instructive that Lee would jump to a mobile opportunity, as a number of reports have hinted he might: It's an exploding segment, which he also pursued heavily at Google.
So why leave now? A few possible guesses. Perhaps he wanted to run his own show, a time-honored transitional vector. Perhaps he saw that mobile search was perhaps not going to be as good a business as desktop search; it's a much harder model to monetize, due to limited screen space and concerns about locational overlays. And if mobile search is not going to be as big on the revenue side, then why stick around?
Another possibility: Maybe Lee wanted to play for the home team and work for a Chinese company. If loyalty to China played any part in Lee's decision, large U.S. companies must figure out a way to up their image in China, and ensure that home-field advantage does not become a deciding factor for Chinese talent -- for thinkers and leaders who play for pride more than for money.
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