Google searches for balance in China


Google was never able to overcome Baidu to take the lead in the search engine realm in China. The American giant has been unable to significantly increase its profit margins as a result of expanding into the People’s Republic of China. But its likely retreat from China imagemay help the Internet giant regain some credibility lost among Western users unhappy about Google’s compliance with Chinese censorship. Does this withdrawal, though, leave Chinese human rights activists in the lurch?

Isaac Mao was proud when he created his first blog post six years ago. “From tonight I am stepping out into the blogosphere,” announced China’s first blogger in August, 2002. Certainly it must have been a real challenge for a Chinese citizen to swim against mainstream local sentiment and start to blog.

It was not long until Chinese authorities censored Mao’s blog. He posted an article explaining the Chinese censorship system, also know as “Great Firewall.”  Concerned about a lack of freedom of speech, Isaac wrote an open letter on his blog to the founders of Google. He argued that the giant search engine was making compromises to censorship by filtering content considered sensitive or immoral from search results. In some cases, Google removed some people’s names from its index database.

Mao saw it coming. Nearly three years after his imploring missive, Google has threatened to pull out of China in protest of government censorship.  On 12 January, Google announced that it will stop censoring search results on its Chinese site,, thus violating Chinese law in response to what the company calls “highly sophisticated” hacking of its website from within China and compromised access of the Gmail accounts of Chinese human rights activists and other nationalities.

No longer, it says, will Google censor web pages deemed by the Chinese authorities to be injurious to the Chinese state.

... the Chinese market is only 1 percent of Google’s $4.8bn annual net profit. ...

By departing from China, Google may have gained integrity and honour as an international brand. But, at the end of the day, is there so much to lose in China?

Figures say it all

Google launched in 2006. As required by the Chinese government, it agreed to censor some search results - such as information about the 1989 Tiananmen Square protests or Tibetan independence, among other topics.

China has more Internet users than any other country in the world. For an international and rapidly growing Internet company like Google, China is a perfect market. At the end of 2009, China’s Internet users totalled 384 million, equivalent to one third of its population of 1.3 billion people. At that time, other Western search companies were already operating there, a sign China was a market no multinational company could afford to miss.

But does moving into China betray Google’s company motto: “Don’t be evil.”? Google described its decision to enter China as a way to improve the access to information, although censored. Google said it sought to provide a fast search engine to the Chinese people, and to promote civil liberties. But four years of self-censorship is a long time for any kind of justification.

Before it declaring “game over” in the Chinese online search battle it is worth noting the US company is only second to Baidu, its largest rival in China, and shares a third of the Chinese market. imageAn amusing example illustrating Baidu´s popularity is the fact the term “Baidu” is the most searched word among Google users in mainland China.

With very little recognition outside its borders, the Chinese brand has a great presence in its own country; its market share is almost 60 percent. If Google pulls out from the Chinese search space, Baidu’s share will increase substantially.

Figures don’t lie; it’s important to note that the Chinese market is only 1 percent of Google’s $4.8bn annual net profit. Most financial analysts agree that Google’s decision will only have little short-term impact on the company’s financial condition.

Google might not be withdrawing if it wasn’t losing ground. Just a few foreign companies could dream of having 30 percent of any Chinese market. Yahoo! has less than 10 percent; Microsoft owns only a tiny market share. Google used to taking a much higher portion of local markets. Nevertheless, Google’s decision to leave China may reveal a realisation that Google can’t beat Baidu, which has close ties with the government.

Google is not a charity. A for-profit company, it is in China to make money. If the international search engine had only stood for ethical and humanitarians values, it would not have entered the Chinese market in the first place. Google’s “no evil” policy is one to respect and admire. However, why did it not stick to this mantra from the beginning?

Too naïve…

When considering the politics of the largest public company in the US, which operates on a massive scale online, it must be noted that sometimes Google must put its principles aside to please the governments with which it does business. Nevertheless, did Google really think it could stay away from Chinese censorship and still do business?  Was it not clear to Google that few, if any, companies can successfully challenge the Chinese government?

Google may have thought it could do good while making a profit in China without having to battle with Chinese authorities. Didn’t they foresee entering the Chinese market as a venture that involves compromising on specific political and economic conditions? image

These problems are endemic to doing business in China; companies should be wary. Google´s management team is surely aware of China’s supreme geopolitical importance. Recent events paint Google as an organisation that does not handle politics as well as it develops technology.

Will China be provoked by Google’s retreat?

Google fans have applauded its threats to leave China. Many see this attempt as a way to engage in a constructive defence of human rights. Nevertheless, China does not seem to be fazed despite the hacking accusations.

It is very unlikely Google can provoke China by refusing to censor its search results.

Google has already stated that it will hold talks with the government in the following weeks to renegotiate their agreement and to examine the possibility of operating an uncensored search engine within the Chinese law. Even if China was willing to accept Google’s terms, which does not seem to be the case, it is very uncertain as to whether the Chinese government will allows a Western company to change their policies. Chinese authority was already echoed last summer when it decided to block citizens from accessing foreign web services like Facebook and Twitter after riots in its western province of Xinjiang.

Still, Google’s gesture does not give many options to the Chinese authorities beyond shutting down its operations.

At the end of the day…..a clever decision

With this gesture Google has drawn a line in the sand. It is difficult to foresee a different ending than Google retiring from China. If it does not pull out now and stick to its principles, Google now risks humiliation. If a company cannot prevent its customers from falling victim to hackers, pulling out might be the only way to restore consumer confidence.

So far, Google’s presence in China has not motivated openness or raised any kind of pressure on the Chinese government to reduce the degree of control and censorship. Furthermore, Google’s “stand” for human rights could in fact give it more credibility.

Google’s gesture has shown, unlike most blue-chip companies, it does business in a different way. Until now, no other multinationals have waged war against the giant Asian power. However one cannot help but wonder whether Google’s management team would still agree to leave China if it had taken 70 or 80 percent of China’s search market.

Most unsettling is not Google or the effects that its retreat from the Chinese market will have on its future expanding business. The big debate here is China’s imposing manners and its unilateral policy and conditions towards other countries. That is the real concern.

Flickr images from users eslitereader, sonyasonya, netzkobold