Tech

Legal threat to Google

By Wang Xing and Chen Limin (China Daily)
Updated: 2010-10-20 08:21

A woman walks in front of Google China's office in Beijing. Seven ad resellers said on Tuesday that they would take legal action against the search engine after the latter terminated contracts with them. Zhuo Ensen / For China Daily

Ad resellers threaten action over 'lost compensation' claims

BEIJING - Seven Google advertising resellers in China said on Tuesday that they will take "legal action" against the search engine if it does not fulfill their demands, which include compensation and an investigation into alleged internal corruption concerning the company's employees.

The dispute underlines the growing tensions between Google and its domestic advertising distributors, which arose after the United States-based company changed its strategy in China earlier this year and redirected users to its Hong Kong site.

Fan Meiyong, general manager of eCentral, a Google ad reseller in Hangzhou, Zhejiang province, told China Daily that the seven ad resellers in East China, whose contracts with Google will be terminated this month, plan to take legal action if the company does not give them proper compensation.

They also demanded that Google launched an internal investigation over some Chinese employees, who the ad resellers claimed were involved with bribes and corruptions.

"There are many problems with Google's sales team in China," said Fan, who represents the resellers. He added that Google will send an executive to Shanghai today to talk with the protesting resellers.

Google announced in late September that it would terminate contracts with the ad resellers, without giving a reason. The announcement came shortly after the search engine said that it would cut its ties with two Chinese ad distributors in July.

Many of the resellers affected have gathered at Google's office in Shanghai to protest during the past few weeks.

Marsha Wang, spokeswoman from Google China, told China Daily on Tuesday that the company does not discuss individual cases and "there are a variety of reasons why we choose to end relationships with certain partners."

She said the company does so lawfully and in line with the terms of their contracts.

"We hope to find new resellers so we can provide an even better service to our advertisers," she added.

It is still unclear how the case will affect Google's business in China. Credit Suisse estimated in a note on Monday that the seven distributors contributed 1.5 billion yuan ($226 million) in gross revenue last year, about 40 percent of Google China's revenue.

However, a general manger from Google's ad retailer in Beijing told China Daily on Tuesday that the protesting retailers actually contributed "less than 20 percent" of the total revenue in China. The manager declined to disclose his identify because of the sensitivity of the issue.

Google's share of China's online market fell to 24.2 percent in the three months to June, from 30.9 percent in the first quarter, according to figures from research firm Analysys International.

Meanwhile, the company's major Chinese rival, Baidu, increased its dominance, with its market share rising to 70 percent in the second quarter from 64 percent in the first three months of the year, Analysys said.

The Chinese government in July renewed Google's Internet Content Provider license. The renewal came after the US firm set up a new home page at google.cn with links to its Hong Kong search engine.

Duncan Clark, president of Beijing-based research firm BDA, said Google's spat with its Chinese advertisers may not impact much of the company's business in China.

"Earlier this year, the situation was unclear after Google made its first statement and people were waiting. That was the worst time because advertisers hate uncertainty," Clark said.

China Daily