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Google and China Square Off in a Battle of Wills
By: Jeff Louis
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Google and China have been in a battle of wills. Google has been operating in China since 2006 when they launched Google.cn, but they may be pulling out of China following a cyber attack from the communist country.

While not stated directly, various online publications point to the Chinese government as the culprit. The attackers used Internet Explorer to hack Gmail in an effort to gain information on human right's activists in China. Google wasn't alone: Between 20 to 30 corporations were targeted, most likely Yahoo, Adobe, Microsoft, and others conducting business in China.

Google's senior vice president and chief legal officer, David Drummond, released much of this information during an interview with CNBC.

Mr. Drummond further outlined Google's stance on the company blog: "These attacks and the surveillance they have uncovered -- combined with the attempts over the past year to further limit free speech on the Web -- have led us to conclude that we should review the feasibility of our business operations in China."

(You can watch the interview here.)

"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The attacks on Google, along with the difficulties encountered conducting an open-search forum in a communist country has left Google, as well as other companies, in a precarious position. The company's blog went on to state Google was considering the removal of their self-imposed censorship, as well as stating they may pull out of China altogether. 

The self-censoring of the company's search results is the cost of doing business in China. It's a decision that has seemingly weighed heavy on Google's management, while also drawing stiff criticism from U.S. government officials, who claimed that Google was "pandering to China."

Censorship goes against the core of everything Google has professed. Google's "Company Overview" page states their mission is "to organize the world's information and make it universally accessible and useful."

"Accessible" and "censored" are not synonyms.

In February 2006, Google testified before the U.S. House of Representatives, regarding their decision to accept restrictions issued by China in order to conduct business within the communist country. Google's decision to enter China followed several events that made the company realize that running operations from outside China's borders wasn't working. The issues included service interruptions, hacking attempts, and the discovery that China had secretly been degrading Google's search results.

Google reached a crossroads and had to choose to remain true to their mission or serve the Chinese people with the hope they could expand their services as time passed.  

Google agreed to enter the China if the Chinese government met the the following conditions:

  • Disclosure to users. Notification will be given to Chinese users whenever search results have been removed.
  • Protection of user privacy. Any services involving personal or confidential data, like e-mail, will not be maintained on Chinese soil.
  • Continued availability of Google.com. The availability of an unfiltered Chinese-language Google.com service will not be terminated.

China agreed, yet Google seemed to be regretful due to the turmoil employees experienced prior to their final decision. The blog related  on a personal level that "China has been a difficult exercise for Google." 

Moral considerations aside, U.S. corporations are eager to conduct business in China due to the country's population of over 1.3 billion people. That equates to more than four times the population of the United States.

China's state-run Internet entity just released the country's online usage surpassed 384 million, an increase to 28.9 percent and nearly one-third of the population.

This means 86 million users, or 29 percent of the populace, were added last year. While China's online penetration is lower than that of many nations (in the U.S., it's about 74 percent of the total population), they have more Internet users than any other country.  

Google.cn has captured 31 percent of the Chinese search market since entering in 2006, while the government-sponsored search engine, Baidu, accounts for 64 percent.

Forbes and China Daily state this is nothing but an exit strategy for Google due to the search-engine company's "failure" in China, and the cyber attacks provide a convenient excuse. (If being second means failure, Yahoo should shutdown their U.S. offices.)

Rebecca Fannin wrote the Forbes article and is of questionable journalistic objectivity based upon her apparent love of all things Chinese. She wrote "The Silicon Dragon," a book based on premise that the "next Steve Jobs or Bill Gates" will arise "from my China."

What's even more suspect is the book, which contains a series of interviews with 12 Chinese entrepreneurs but offers no countering view. How can a communist country boast entrepreneurs and investors for that matter?

Fannin, like others, misses the point: China isn't about today, tomorrow, or 2012.

Google is betting on China's future as the undisputed, untapped consumer market in the world. They can already claim the most online and cell phone users, and neither market is near saturation. This comes as Google's largest likely dilemma, especially with Chrome OS on the horizon and plans to introduce Android already underway.

Other considerations are to be taken as well, such as the fate of YouTube. Analysts estimate that Google.cn's 2009 gross revenue is between $200 to $250 million dollars, accounting for a mere one percent of their annual gross. 

Leaving China gives Google the moral high ground, for no one confronts the Chinese government. Google will have to weigh this against China's future economic potential. Stockholders are watching the standoff intently, and Google's stock has taken a hit recently.

If Google does leave China, one question the company will have weigh is whether the moral position will payoff against the future losses and the possibility that they may have to renege their Chinese market with heads bowed.

Tomorrow is unclear, but a few likely outcomes exist:

  • Baidu will undoubtedly monopolize China, leaving the Chinese people with no search alternative.
  • Google's human right's and censorship position may aid Google in other world markets, capitalizing on user privacy and increasing Google's brand value.
  • Google's departure may become an impetus for a change in the way other U.S. companies conduct business in China, forcing other less-progressive companies to rethink their entry into a decidedly dicey market.

Until Google or China make a move, tomorrow is just another day.   


   

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About the Author

Jeff Louis: Media Planner, Brand Project Manager, blogger, and aspiring writer. Please leave a comment or get in touch with Jeff on Twitter. As always, thank you for reading!

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