Google Inc.’s (NASDAQ: GOOG) Transparency Report showed a sharp drop in traffic from China. The cause is not known, but it could be that the central government does not want its own people to track the changing of the guard among its top leaders. There has been friction among these leaders about how much power each will have once the changeover is done. Oddly, traffic did pick up more recently, according to Bloomberg.

China continues to be Google’s Achilles’ heel. China is the largest internet market in the world. Google has suffered from hacking and traffic blocks there, and it is a distant second to local search company Baidu Inc. (NASDAQ: BIDU) in terms of market share. The Chinese government seems set on keeping Google well behind its local favorite. With the roadblock in China, there are few places Google can turn outside the largest developed nations and parts of South America. Russia has a dominant search engine — Yandex. And India has its own — Rediff.

Google’s problems in China may be its most immediate ones among developed nations, but its problems in these regions are much greater than that.

Douglas A. McIntyre

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