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Google will struggle if it re-enters China, says its former country head

TechCrunch logo TechCrunch 6/9/2018 Jon Russell

Photo by Igor Golovniov/SOPA Images/LightRocket via Getty Images © Igor Golovniov/SOPA Images/LightRocket via Getty Images Photo by Igor Golovniov/SOPA Images/LightRocket via Getty Images The odds are stacked against Google if the reports are true and the company is trying to bring its services back to China, according to the former head of Google China.

News reports last month uncovered details of internal plans to introduce a search product and a news app in China, moves that would mark a re-entry to the consumer market which Google left in 2010. The plans, which follow a noticeable increase in activity in China from Google, were widely criticized by activists and also raised concern internally from Google employees.

Kaifu Lee left the search giant nine years following a four-year stint, and today he's best-known as one of the world's leading thinkers on AI and the founding partner of Chinese VC Sinovation Ventures. Speaking at TechCrunch Disrupt San Francisco this week, he shared his belief that China's tech ecosystem is rapidly catching the U.S. on AI -- that also spills over into more general tech, and the kind of competitors that Google would face were it to return to China.

"I think re-entry is always difficult," Lee said. But "the bigger issue really is can an American multinational succeed in China now that China has bifurcated into this parallel universe."

Lee helmed Google's China business in its battle against domestic search firm Baidu . He said that Google's market share jumped from nine percent to 24 percent during his tenure, while total revenue was "approaching" $1 billion, but now the outlook in China is less rosy in 2018.

While he admitted that Google "should have a higher chance than any other company" at succeeding in China, he isn't optimistic that it -- or indeed any U.S. firm -- can.

"People [in China] aren’t looking for a new search engine or an app store, new companies are emerging addressing previously unknown customer needs [and] innovations are coming out," Lee explained.

"The new graduates generally prefer to work for Chinese companies and then, lastly, the heads of multinationals are really just professional managers. If they were to compete against local entrepreneurs who are gladiators in this colosseum, I don't think the American companies will have a high chance of succeeding in this environment," he added.

Google isn't the only U.S. firm looking at China, of course.

Facebook briefly received approval for a China-based subsidiary -- it was later withdrawn following media reports -- while it has tested local products in the past and engaged in dialogue with regulators. Uber was more successful, but it famously spent more than $1 billion per year to compete in China before being sold to local rival Didi. The only companies that could be credited with not failing in China are LinkedIn, Evernote and Airbnb, and, in each case, the actual impact is debatable. Certainly, each has strong/stronger local rivals that remain active.

"I think any American company would have a hard time in China now, Apple being the single exception," Lee said." And I think that's because [Apple is] mostly a hardware product and the product has become a fashion symbol... so that's different."

In the case of Google, the challenge is far different. Even local social media companies struggle to adhere to adequately police online content according to the whim of authorities. New media firm Toutiao, for example, had numerous apps temporarily suspended from local app stores, while it massively strengthened its content checking teams and made a public apology. Tencent, Alibaba and others also employ in-house teams to police the content and users on their platforms.

That's a huge challenge without even thinking about finding the right product-market fit or engaging an audience.

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