January 13, 2010 – Comments (2)

I'm fascinated by this dust-up between Google and the government of China that started with this blog post from Google's chief legal officer Don Drummond. According to it, Google's operations in China were hacked with the goal of accessing the email accounts of Chinese human rights activists. This event apparently spurred an epiphany:

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. 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.

Now, despite its "Do No Evil" mission, no one should consider Google to be a charitable organization. Thus, I think there's more to this story than meets the eye (i.e., Google getting angry about hacking and censorship and therefore leaving the world's largest and fastest-growing Internet market0.

So what do we know?

First, we know that Google has been getting its butt kicked by Baidu.com. Baidu's search market share in 3Q09 was 77%.

Second, we know that the PRC government forced Google's hand when it created Google.cn because it was using its firewall to slow Google.com. This was ostensible because they didn't want Google showing profane or other inappropriate results, but Google was slow in China even when you searched innocent terms. The conspiracy theorists out there would say that the government was doing this on purpose to aid Baidu's competitive advantage in China since search is all about speed in addition to accuracy.

Third, we know generally that while Google.cn delivers better search results than Baidu, many Chinese continue to use Baidu out of some nationalist pride.

Fourth, we know that Google has reportedly been looking to introduce Android into China's massive mobile phone market.

Fifth, we know that the presence of world-famous western companies in China gives the PRC government credibility. After all, it can't be that bad, so the story goes, if companies such as Google are happy to be working in China under the ruling regime.

Put all of this together, and I would be shocked that Google truly wants to pull out of China. There's too much money to be made there and Google has proved over and over again that the company at the end of the day really likes money. So what are they doing?

Speculation on my part, but maybe they thought that if they publicly threatened to pull out of China, it would be embarrassing to the Chinese government and the government might cave on the Google.cn issue or some such. But even if that didn't happen, by taking a stand against the PRC government, Google might suspect that they could win favor with Chinese users who then might then consider using the search engine or at least stop thinking so patriotically about Baidu. Or maybe Google knows it's going to lose in China and this way it maintains an aura of strength even as it shuts down its business there (going down in a blaze of glory, so to speak).

Speculation aside, I think Google finds out here that the government doesn't like being publicly called out and they end up leaving China. James Fallows wrote recently that he thinks this may be the beginning of an adversarial period for the PRC government and this would certainly feed into that.

Incredible, though, that Google would leave the China market. There's something else to this story.