Google are talking tough on China but it’s an ever-expanding market that the company knows it afford to walk away from, says Paul O’Flaherty.
David Drummond, SVP of Corporate Development and Chief Legal Officer for Google, just dropped a very provocative post over on the official Google blog.
Normally a post of this nature would go pretty much unnoticed (except by the tin-foil hat wearing security freaks) as it details an attempted attack on Google and a number of other companies operating within China.
What makes this post truly interesting however is the tone of the post, which, to my mind at least insinuates that the Chinese government were themselves responsible (or at least played a part), without ever coming out and actually making that accusation.
While that was provocative enough, the real sensationalism was to be found in this bold statement:
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.
Wow, it sounds like Google is going to pull out of China. After all we know the Chinese government won’t back down, so what choice will they have?
To be honest, it’s all sabre rattling. Google is trying to put pressure on the Chinese government, a regime that it knows doesn’t even bow to the massive weight of global political and public opinion.
In fact, Google is so aware of this that they provided themselves with a back door within their statement:
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
I’m confident that the settlement will come, one way or the other, and there are a number of reasons for it.
First and foremost there is the financial situation. Simply put, the amount of money Google will lose.
In Q2 of 2009 there were 338 million internet users in China and Google was the search engine of choice for 23.7% (about 80 million) of those users in Q3. That’s more users than North America which had 246.8 million users.
Add that to the fact that the Chinese market is growing rapidly as internet penetration is only 26.9% (or 1 in 4 people are online) compared to the saturated US market which has 74.2% (or 3 out of 4 online) penetration.
It doesn’t take a rocket scientist to see that there is too much at stake to walk away and too much potential for growth.
Could Google really walk away from that? Could they honestly allow their market share in China to be eaten up by Baidu (the number 1 search engine in China) or to allow Ballmer to walk Microsoft in there and expand their market share? Or even better have Ballmer cut some sort of a deal with the Chinese government?
Microsoft already operates Bing in China so it’s not as if they can be demonised for pushing into the territory.
The Chinese government also has a stubborn streak and disregard for international opinion that is beyond legendary and Microsoft are definitely not above doing something that may not immediately be popular in order to gain a long term advantage. Besides, the public is too wrapped up in dealing with their own economic woes and miserable lives to really care who is providing search results to the Chinese.
However Google will stay in China for one reason above all else; it is not a public service. It is a business and its primary responsibility is not to its users but to its shareholders. Leaving China would not be in the shareholders’ best interest.
Google are testing the waters to see if they can get a concession. It would take some serious brass balls to pull out of the Chinese market and give their foothold over to competitors. Brass balls, which for all
Google has done in the past, I think are more like two rolled up socks stuffed down the underpants.
They may look impressive from afar, but they don’t hold up to scrutiny.