Let’s start with what could have been good for everyone.  Analysys found that search engines in China took in 1.53 billion yuan (or $223 million) during the fourth quarter of 2008, which represents an increase of 4.2 percent compared to the previous quarter and a year-over-year rise of 61.2 percent.  Recession or no, then, there’s plenty of money still being put into the field.

Or plenty of money for some search companies, anyway.  Baidu, China’s far-and-away search leader, saw its market share increase from 59.3 percent in 2007 to 62.2 percent.  Google, meanwhile, managed to pull off an increase at the same time, moving from 23.4 percent to 27.8 percent.

It was Yahoo that suffered as a result.  A not-impressive 2007 market share of 11.0 percent was almost halved, with Analysys putting the 2008 figure at 5.8 percent.  The corporation can’t seem to catch a break on either side of the Pacific.

Ah, well.  We’ll see how 2009 goes, perhaps catching some early clues as all of these companies give their own take on 2008′s fourth quarter over the next few weeks.

China Central Television is behind the claims.  Since it also broke the Baidu story, the situation looks rather serious.  Helping people who sell useless treatments for high prices goes way beyond any "don’t be evil" gray area.

 

But whether Google and Yahoo have followed precisely in Baidu’s footsteps remains to be seen.  A JLM Pacific Epoch article states, "China Central Television’s morning news reported on Thursday that Google China lists links for some unlicensed medical providers at the top of search results and in its right-hand sponsored links section."

Which makes it sound more like the unlicensed docs might simply be buying normal ads.  And the matter of what sort screening process should take place there is somewhat up for debate.

If anyone who can understand Chinese would like to chip in, feel free.  Otherwise, we’ll direct a hat tip to Eric Savitz and just wait to see what happens.

In fact, all an Alibaba spokeswoman would tell Reuters was, “We have started preparations for an IPO,” and to be fair, Alibaba may be as clueless on some of these issues as we are – its IPO application is in the hands of a listing committee.

But BusinessWeek’s Joe McDonald reports, “Hong Kong newspapers, citing unidentified sources, said the IPO could raise as much as $1 billion to pay for Alibaba to expand abroad.”  Also, “The Hong Kong newspaper Ta Kung Pao said shares could begin trading in September.”

That second statement sounds optimistic – financial matters never seem to move that quickly.  paidContent.org’s Robert Andrews notes, however, “It was first rumored last month that Alibaba would seek to float in the Far East, rather than ape its siblings Sina, Sohu and Baidu in listing on the Nasdaq, with the reluctance to float in the U.S. said to be down to tighter American financial laws and higher costs.”

We’ll keep you up to date on this story as it develops.  Bearing in mind that Yahoo owns 40 percent of Alibaba, and Alibaba runs Yahoo China, there are several angles to consider.

It’s been an up and down week for digital music aficionados, and it’s only Tuesday.

Yesterday, word came down the pipeline that the U.S. Copyright Royalty Board had accepted SoundExchange’s proposal for overhauling the royalty structure for streaming audio content, a move that essentially killed both webcasting and Internet radio in one fell swoop.

Today, buzz reached a fever pitch surrounding the release of the Barnaked Ladies latest album. The event is significant, because the group released the tracks completely free of DRM and, at least initially, for free – a move that supporters of the movement against the RIAA’s tyranny embraced as a herald of even more victories to come.

But as Luke Skywalker discovered after he destroyed the first Death Star, the Empire has a nasty habit of striking back.

Digital Music News reports of the backlash from major record labels against Yahoo China:

Yahoo China operator Alibaba is now on the receiving end of a major lawsuit, one that includes plaintiffs Warner Music Group and Universal Music Group.  In total, a group of eleven music companies have targeted Yahoo China, alleging widespread infringement related to digital downloads, lyrics, ringtones, and other assets. 

The suit requests compensation of 5.5 million yuan ($687,500) and the immediate shutdown of offending pages.  According to information supplied by Chinese news agency Xinhua, the case will be heard by the Beijing No. 2 Intermediate People’s Court.  The violations revolve around 229 Chinese and English songs.

What can I say that hasn’t already been said before? What arguments can I present that haven’t already been the object of much discourse from individuals who understand the intricacies of the music industry on a much deeper level than could ever hope to achieve?

The truth, however, is still the truth; record companies just don’t get it. Fighting to retain control of music distribution is a battle they’ve already lost. Musicians are finally beginning to understand that they don’t need the major record labels anymore in order to get their music out to a broad audience.

It’s all about control; and the record labels are in denial that they are still in the driver’s seat.

Ma will do this instead of trying to battle with sites like Baidu, a more general search site that ranks as the leader in China. The environment has become fiercely competitive, and rather than try to overcome Baidu, Ma will shift Yahoo China to a different arena.

An AP report cited Ma’s observations of Yahoo China’s place in search, one where it is lagging behind Baidu and Google, and losing money too.

“If Yahoo is going to win, it has to do so in a new way,” he said in the report. “What’s the point of building another Sina.com?”

Ma feels Yahoo China has appeal to “high-income users and entrepreneurs,” while Baidu appeals to students, who are not exactly legendary for their high income levels.

He hasn’t provided details on when or what Yahoo China would change to fulfill a shift to business-to-business customers. Ma’s strategy does mirror efforts of companies in the US that have similar aims in dealing with businesses rather than consumers as primary customers.

“We don’t want those not interested in business or making money. They can go to Baidu,” he said in the report. “Our main focus is the high-end.”

That high-end will come out of a growing Internet userbase. It is thought by investment firm Piper Jaffray that 123 million Chinese users will do 816 million searches per day through 2007, and generate search ad revenue of $1 billion through the year.

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An earlier lawsuit against Qihoo is still active; at issue is a Qihoo anti-spyware program, called 360 Safe, “that prompts users to de-install Yahoo China’s toolbar,” according to Fortune’s Elen Wu.

That dispute became fairly ugly, with references to “personal vendettas” and “evil” tossed about by both sides. This new lawsuit isn’t likely to mend relations between the two companies. Matt Marshall, who broke the story, reported on the details.

“Yahoo China will claim Zhou was already using his position . . . to steal partnership and investment opportunities away from Yahoo China, preparing the groundwork for his exodus to Qihoo,” Marshall wrote.

“He also offered money to key Yahoo China staff if they left the company, the suit will allege. He even launched press releases through front PR firms, saying in one case that a Yahoo China deal with MSN had expired when in fact it hadn’t, the suit will claim.”

And as if all that wasn’t enough, Marshall’s VentureBeat article also noted that “a separate source says Yahoo’s co-founder Jerry Yang is actively seeking to dissuade investors from backing Qihoo.”

Yahoo China is owned by Alibaba, a Chinese company. The fate of the lawsuit will still reflect on its American counterpart, though. China has proven to be a “challenging” market for Yahoo, Google, and Microsoft.

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The International Federation for the Phonographic Industry (IFPI) spent part of 2005 chasing down China’s top search engine, Baidu.com, for infringing on music copyrights. Now the IFPI has Yahoo China in its sights, a Bloomberg report noted this morning.

Aiding the action will be a new Chinese law that took effect on July 1st. This law focuses on punishing those who illegally share files. However, a provision in the law makes websites jointly liable for linking to those files “if it knows or should know that the work, performance or sound or video recording linked to was infringing,” the report noted.

Such a provision places an immense burden on search engines, which would have to manually review every link to a song or video. To avoid that expense, search engines in China could conceivably prevent any media file from being indexed, regardless of its legality for sharing.

The IFPI is not saying how much its music label membership wants from the search engines as compensation for alleged infringement. John Kennedy, IFPI chairman, told Bloomberg a similar case in the US could be worth tens of millions of dollars or more.

Infringement of copyrighted works has been an ongoing issue between the United States and China for some time. If China does not improve its record on cracking down on such piracy, the US has threatened to bring up the matter with the World Trade Organization.

In 2005, the US Supreme Court had the opportunity to clarify the whole issue of file sharing. In MGM v Grokster, the court instead chose to issue an opinion that a website that promotes itself as a way of evading copyright was illegal, and neatly dodged the central question about whether or not people can trade files legally.

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