By Godwin Chellam
Microsoft Corp.'s Internet unit, MSN, expects China to become one of its top five markets by 2010, fueled by growing demand for its popular email and search engine software, executives said.
Chris Dobson, general manager of digital marketing sales at MSN International, told Reuters the software giant intended to ride that growth while taking a larger share of the country's nascent but booming $500 million (287.9 million pound) online advertising market.
The world's second-largest Internet market -- 100 million Web users and counting -- does not even rank among MSN's 10 biggest markets now, executives told Reuters late on Monday.
"We're starting from very modest beginnings in the Chinese market, but if we look five years out and if we haven't graduated China to be in the top five of the world's market, then we would have failed," Dobson said in an interview in Shanghai, where he was attending an advertising forum.
In May, the software giant launched MSN China, a Chinese-language portal with content provided by local partners.
The portal is run by Shanghai MSN Network Communications Ltd., a joint venture Microsoft established with Shanghai Alliance Investment Ltd.
Microsoft has said the portal will offer far more communication, information and content than available through the MSN services, such as Hotmail and Messenger, it already runs in China.
Dobson said Messenger, an instant messaging platform, was especially popular. The service now had 10 million users versus about 7 million when it was launched six months ago.
Major foreign players such as Yahoo Inc. (Nasdaq:YHOO - news) and Google Inc. have already opened Chinese sites and established positions in the market through a string of acquisitions.
SEARCH, ADS AND CENSORSHIP
MSN executives said they were particularly encouraged by the growth of the online advertising market in China, where state media said revenues hit 1.9 billion yuan last year and are expected to almost double this year.
"Display advertisements, for example, have been growing 50 percent annually and we expect this trend to continue," said Chuan Luo, general manager of MSN's Chinese venture.
But competition on search engines, fought over by Yahoo, Google and local rivals such as Baidu.com Inc, Sohu.com and Sina Corp., remains a big challenge.
Dobson said MSN would leverage on the popularity of Hotmail, which had more than 200 million users worldwide, to draw users to its portal.
"We were probably late into search as a company but we've been late before and it doesn't necessarily mean we'll be late at the end. It's a long game, it's a big market, there's room for more than one player," he said.
The software giant has long seen China as a key growth market, but also a headache because of widespread software piracy and copyright issues.
Censorship has also been a major problem for many Internet players, who voluntarily block searches and other links to sensitive subjects like the Falun Gong religious movement and the 1989 crackdown on pro-democracy protesters in Tiananmen Square.
MSN was drawn into controversy earlier this year when it censored words such as "freedom," "democracy" and "human rights" on its free online journals, but Dobson said the portal was only acting in accordance with local laws.
Copyright 2005 Reuters Limited.
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