Head of Google China leaving to start new venture

Kai-Fu Lee opened Google's first lab in China and launched Google.cn

The head of Google's China operations, a former Microsoft executive recruited to kick start Google's business in the most populous country in the world, will leave in mid-September to start a new venture in Beijing, Google said Friday.

Kai-Fu Lee, president of Google's Greater China operations, which include Hong Kong and Taiwan as well as China, will be replaced by two people, Google said in a statement. Boon-Lock Yeo, director of Google's Shanghai engineering office, will take over the lead engineering role in Greater China, while John Liu, head of sales in Greater China, will take over Lee's business and operational responsibilities as vice president of sales and operations.

Lee's move is surprising since he led Google to become a significant player in China during his four-year tenure, said Elinor Leung, an analyst at CLSA Asia-Pacific Markets. It may be hard to replace Lee's strong influence in China's Internet industry, she said.

But Lee's departure also comes at a time Google continues to struggle for market share gains against Baidu.com, China's Internet search leader. Baidu.com commands a massive lead over Google in China, with 75.7 percent of online searches in China in the second quarter, up 1.6 percentage points from the first quarter, according to iResearch, a Chinese Internet consultancy. Google attracted 19.8 percent of the searches, down 1.1 percentage points.

"It has always been a tough job to compete with Baidu," said Leung. "Google has gained market share but it's mainly from Yahoo."

Yahoo and a range of other search engines compete for the small slice of China's search market not dominated by Google and Baidu.

Still, Google's market share in China marks a solid increase compared to when Lee started. At the time, Google had an investment in Baidu.com and didn't compete in Chinese search the country. Lee oversaw the launch of Google.cn, Google's China domain, as well as Google's first research and development center in China in April of 2006, establishing the presence Google needed to compete against Baidu.com. Google China under Lee also launched a free music download search feature, which is supported by advertising and not available in other countries. The move aimed to compete with a similar and highly popular service offered by Baidu.

Google and other foreign companies face stricter monitoring by the Chinese government than their local rivals do, said Leung. In June, China blasted Google for allowing pornographic search results to appear on its Chinese portal and briefly blocked Google.com and other Google sites in the country. Google updated its search algorithm to filter out the problem links. Baidu, which also filters porn from search results, may be more comfortable working around government regulations and launching new products, Leung said.

Controversy surrounded Lee at his start in the company. Microsoft, Lee's former employer, filed a lawsuit seeking to bar him from working at Google, a ploy that ultimately failed.

"Kai-Fu has made an enormous contribution to Google over the last four years -- helping dramatically to improve the quality and range of services that we offer in China and ensuring that we continue to innovate on the web for the benefit of users and advertisers," Google said in the statement.

Lee's new venture will be an "innovation platform" for young Chinese, he wrote in a message on Twitter. He is leaving Google after turning down another four-year offer from the company, he wrote on a local blog.

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