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Google vs China: who's got the most to lose?

Posted on 22 Mar 2010 at 15:32

It also took real pains to protect users, avoiding the mistakes Yahoo made by locating servers inside China. This meant Yahoo could be forced to hand over data to the authorities on activists such as Shi Tao, who is currently serving ten years in jail for an email he sent using Yahoo mail. Google also protected the physical safety of its Chinese employees; all Chinese companies have to name individuals who are liable for its actions, and in Google’s case they were always in California or Hong Kong.

Beijing realises it has nothing to gain by pushing Google away and being overly hostile

As a result, the company started to gain the respect of the tech-savvy urban elite, and built a market share of around 35%, with around $300 million to $400 million a year in revenue. As Kuo put it “this is absolutely nothing to sneeze at.” Its users were, compared to local rival Baidu, more urban, wealthier and coastal. In terms of both market share and audience demographics, Google could be walking away from a profitable and desirable business – all the more so when you consider there are currently 384 million internet users in China, more than the entire population of the USA.

High stakes

Given the fact it’s high stakes for both the CCP and Google, it’s perhaps unsurprising there has been a strange and significant impasse since Google’s original blog post. Kuo thinks Beijing realises it has nothing to gain by pushing Google away and being overly hostile. The ball is very much in Google’s court.

Yet it’s clear the company’s making preparations to decamp. Shutting Google.cn is an enormous logistical challenge as it still intends to serve Chinese internet users, and so will need to replicate Google.cn features on Google.com. China also has strong labour protection laws, so there’s a mountain of HR issues for Google to negotiate.

Kuo pointed out that while there are pros for the hardline argument within the CCP, in that it appeases nationalists and saves face, there are significant cons. The rulers of China are largely technocrats and engineers, and reports they’ve commissioned have claimed Google closing would be a setback to China’s technological progress; then there’s the backlash from Google’s urban elite audience, and of course, the damage to China’s international image. Finally, it would cede a monopoly in search to Baidu – and though they’re communists, in other technology industries such as the mobile phone market, the CCP has shown it likes competition.

The worst case scenario is that Google departs in an atmosphere of acrimony, and the CCP retaliates by blocking Google.com. Kuo thinks this unlikely, and that the more likely outcome is Google shuttering Google.cn but offering Chinese-language search from Google.com, while continuing to run sales and mobile R&D from inside China.

The best case scenario he laid out was Google.cn being allowed to stop censoring results and keep going. Kuo pointed out Google is very much a Web 1.0 company, in that it links to static content elsewhere, and that the CCP has been far more interested in censoring Web 2.0 sites, such as social networks, which allow the rapid dissemination of information and organisation of people – things which the CCP recognises as dangerous to its control of power. But even Kuo admits this scenario is overly optimistic.

Judged a failure?

Kuo finished his talk by saying that when Google went to China in 2005 it argued for engagement. If it was hoping to win over the CCP, then its time in China must, he argued, be judged a failure, as internet censorship has worsened. If, however, it was to engage with Chinese internet users, then it was very successful – Google succeeded in creating a company that became a part of the Chinese internet landscape and one that will be missed.

He concluded by asking what drove Google to this all or nothing gambit? He admitted a strategy of nuanced engagement is resource intensive and Google faces many Governmental tussles all around the world. Perhaps it decided it couldn’t afford to fight a battle with the CCP every month, and this resulted in a binary decision – tow the line or cut its losses.

Author: Alex Watson