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Google has had a tough time in China. Time for plan B

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The search is on: Google thinks DoubleClick offers it best opportunity

While Alibaba Group is turning its attention to the US, search giant Google is again trying to bulk up its efforts in China, with Liu Yun, vice president of Google China, recently making a high-profile appearance to promote DoubleClick, the advertising company.

Let’s backtrack: DoubleClick, which Google bought in 2007 for $3.1 billion, is one of the biggest players in display advertising online through banners, videos and other display formats. Often the focus is on improving brand awareness, rather than direct sales promotion. Google, on the other hand, is more dominant in the paid search market.

Of course, Google’s difficult relationship with Chinese internet regulators means that it has had trouble competing with domestic paid search companies, most notably Baidu, who have grabbed a chunk of the domestic market.

A year ago Google moved its paid search business outside mainland China, choosing instead to operate via Hong Kong. Its share of search revenue then dropped to 19.6% in the second quarter this year, from 35.6% a year earlier.

The DoubleClick business offers an alternative sales opportunity, and Google is betting that online advertising will take off as companies seek to target the country’s growing consumer base.

Last year the total advertising market online in China grew by nearly 60%, reaching Rmb32.7 billion, according to a report from Shanghai-based iResearch Consulting Group. While that’s still a small fraction of the market in the US, where online advertising hit a record high of $26 billion in 2010, it’s a significant piece of China’s overall advertising pie.

Within that, Liu expects to see online display take up a bigger share, telling the Economic Observer that DoubleClick could generate more revenue for Google in China than its search engine business within three years.

“The quantity of display ads run by Google China’s top 50 advertisers doubled in 2010,” says Liu. “And 97% of the country’s largest advertisers have embraced display ad campaigns.”

The Mountain View-based company also continues to operate its Gmail and Google Maps products in China. Recently it launched Shihui, an aggregator service that collects and catalogues group-buying deals (a Groupon-like business).

But as one door opens with DoubleClick, another closes elsewhere. In mid-September, Google launched it’s social networking service Google+ in China. It was immediately blocked by authorities, similar to the fate of other non-Chinese social networking sites like Facebook.

An executive at Google told Japan’s Nikkei newspaper that Beijing’s restrictive stance had been expected, but that “it is still disappointing because it reduces our opportunities to make money.”

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