Google seeks to dominate China with music

With Google throwing its weight around in an attempt to stop a Microsoft-Yahoo tie-up that would threaten its dominance of the online advertising industry in the West, the search engine giant is having to come up with cleverer ideas to bolster its standing in a market where it is not No 1, China.

The company is trying to fix up a delicate deal with the world's biggest music companies so it can lure Chinese web users to its site with free music downloads.

In doing so, it hopes finally to make itself competitive against Baidu.com, the upstart search engine which dominates the Chinese market and which gets a large proportion of its traffic from users searching for illegal music.

Google hopes that it can tease out a deal from the music industry to allow it to give away music for free, in return for splitting any advertising revenue it can generate from music searches. Barely 10 per cent of the music accessed in China is legally licensed in any case, and Google hopes that record labels will see their proposal as a chance to undercut a culture of piracy.

At the moment, Google does not throw up links to pirated music when users search the web. Instead, it guides them to a service offering paid-for downloads, but this is only encouraging users to stick with Baidu, which allows users to stream unlicensed music.

Google believes this is one of the main reasons why Baidu has 60 per cent of the search market in China, measured by revenues from advertising alongside search results. Google has 26 per cent.

Universal Music, the world's largest collection of record labels, home to U2, Mariah Carey and Eminem, has signed on to the free music plan, which would be run through Top100.cn, a Beijing-based online music business. Google insiders are confident SonyBMG and EMI will also sign up soon, while the fourth of the four major music groups, Warner Music, is also believed to have expressed an interest. At the same time, Warner, Sony and EMI are suing Baidu and two other Chinese internet companies for building a business on copyright infringement. Their latest legal challenge – similar to previously unsuccessful lawsuits in China – was launched earlier this week.

In the West, record labels have concentrated on encouraging music fans to pay for digital music via online stores such as iTunes and Amazon's new MP3 store. An experiment with advertising-funded free music in China would be a significant break with the past.