Goodbye to Google China?

What if Google left China? Though such thing hadn’t happened, China should reconsider its regulations on Internet and search engine.

On January 12, 2010, Google’s senior vice president David Drummond said on his official blog that Google could leave China.

According to Drummond, Google has been tired of the hacking from China to its email system and Chinese government’s requirements of censoring search results. It was planning to review the feasibility of operation in China and hoped to reach an agreement with the Chinese government on a search engine without filtration operated within the law. If no agreement was reached, Google would have to close Google.cn and the office in China.

This news shocked the world. If Google left China, it would loose the Chinese market which it had been working on for years. The Chinese Netizens might have fewer opportunities to share information based on technology.

Some people attributed Google’s action to its “Don’t be evil” value concept as well as its unaccommodating with Chinese Internet circumstance. Some others said Google wanted to pursue more commercial benefits with its unyielding attitude or to find a good reason to explain its failure in competition with Baidu.

After the declaration of possible retreat, the Chinese Netizens found that they could have more search results with some sensitive key words, though the words “some search results are not shown according to local laws and regulations” are still there.

On January 18, Google CEO Eric Schmidt said that the company was still talking with the Chinese government and Google might stay in China. He said emotionally: “We love China and Chinese people!” One day later, the staff for Google.cn, who were said to leave their posts, returned to the headquarters of Google.cn in Beijing. Some people even saw Google’s advertisements appear in TV. “If Google decided to leave China, it was meaningless for the advertisements. Maybe it was a premonition for the change of Google’s attitudes.”

Google’s “Don’t Be Evil”

It was hard to imagine that a world-leading company would declare to leave an important market without any premonitions. But it was really a case of “how Google did things.”

Google stuck to its appeal “Don’t be evil” from its foundation. It has been trying its best to provide free information with enough fluidity for the users. For example, unlike Baidu, which has been blamed for interfering in users’ search by paid listing, Google doesn’t allow the advertisements into its search results. What’s more important is that Google doesn’t want to be operated in a network needing censoring.

The founder of Google Sergey Brin and Larry Page once declared before Google went public in 2004: “Don’t be evil. Return is available if the company can make positive contributions to the world.” The two founders hold 58% of Google’s shares and have the right to decide everything for the company, Brin, who grew up in Soviet Union, has been feeling hatred for the content censoring required by the government.

In April 2006, Google agreed to shield some websites in order to get the approval to launch the Chinese search engine in China. This decision was greatly criticized in the world and led to conflicts inside Google. Some senior executive represented by Brin were not satisfied with this. Then Google was blamed for not hiding the pornographic information in China in 2009, making Google think carefully of leaving China. Finally, the hacker’s attacking Gmail resulted in the aforementioned declaration.

For many Chinese Netizens, Google represented fairness, openness and technology. It was quite popular among Chinese users.

When the news came out, the Chinese Netizens felt confused and pitiful. According to a survey, 84.5% of the Chinese Netizens thought Google should not leave. Some people even went to the headquarters of Google in Beijing to present flowers, “mourning” for its leave.

The experts were also worried about the negative results of Google’s leave. IT reviewer Xie Wen said that China’s Internet industry would degrade to “the Stone Age” if the most advanced search tool could not be used in China. The famous writer Han Han also showed his worries about this matter. He wrote in his blog: “If all the top websites left us, China would be the largest local area network in the world.”

But some people felt repelled by Google’s actions. Sun Yunfeng, chief product designer of Baidu, Google’s largest rival in China, said he “felt disgusting” about Google’s “show of leaving”. But he stated that this was just his personal opinion and didn’t represent Baidu.

In addition, a certain number of people believed that Google’s leave would not exert negative influence upon Chinese Internet industry and they thought that the Chinese government should not accept the conditions brought forward by Google.

Fight for Commercial Benefit

According to the data, Google China’s revenue in 2008 was 210 million US dollars while Baidu’s revenue in the same year was 468.8 million US dollars. Google’s annual revenue around the world was 21.8 billion US dollars in 2008. Though the revenue in China accounted for less than one percent, leaving this market was still a great loss for Google.

China has become the largest Internet market in the world. On January 15, 2010, China Internet Network Information Center (CINIC) issued a report, saying that the number of Internet users in China had reached 384 million by December 2009 and the network coverage rate reached 28.9%. Tang Jun, former CEO of Microsoft China considered Google’s actions as the “most foolish in history”, because “giving up China means giving up half of the future world”. When the news that Google planned to leave China came out, Baidu’s stock in NASDAQ increased by 16.8% to 451.5 US dollars while Google’s share price fell by 1.9% to 579.2 US dollars.

When Google China was founded in 2006, Kaifu Lee, then the president of Google China, conducted the “China Experiment” for Google. The core of the experiment was the “American-style innovation and Chinese-style operation and Chinese-style government relationship”. The American-style innovation meant to bring Google’s innovative results in the USA, American-style research and development pattern and American corporate culture into China. The Chinese-style operation included local management teams and local partners. The Chinese-style government relationship meant the accommodation with the Chinese laws and regulations.

However, Google’s localization was not successful. The experts said that all the Google services needing login have not got into China, including Gmail, Gtalk and Blogger. All the deeds of Google China focused on the network traffic: including automate move to Google.cn from Google.com, the cooperation between Xunlei, Sina and Tianya, acquisition of 265.com, the introduction of Google pinyin input and Google music. This was completely different from Google’s traditional way of increasing Internet traffic by improving product quality.

“Kaifu Lee’s Google China was not like Google; instead, it was more like Baidu.” However, using the rival’s method to compete could not help Google China defeat Baidu. Google China’s market share always fell behind Baidu.

While bearing the pressure from the headquarters, Kaifu Lee found it more and more difficult to mediate between Google and the relevant Chinese regulatory department. In March 2009, YouTube was shielded in China which dissatisfied Google headquarters very much. Then, in June 2009, Google was blamed for distributing pornographic information in China. The Chinese government ordered Google to rectify its search engine and fined it for its malfunctions.

Although some people thought that the search engine should not be responsible for the pornographic websites searched by the users, this case indeed brought about great impact to Google. In addition, Google was also haunted by the accusation of tax evasion and the conflicts of copyrights with the China Literature Copyright Association. In September 2009, Kaifu Lee resigned from Google and started his own business.

A Show or a Warning?

When Google declared the plan to leave China, some people said this was a kind of “show” or an excuse to quit China after failure in competition. In truth, Google was not the only US IT company suffering failure in China. Previously, eBay lost the competition to Taobao. Yahoo’s Chinese search engine was acquired by Alibaba. Compared with them, Google’s performance in China was much better. According to the data, Google and Baidu nearly monopolized the whole Chinese search engine market in 2009, of which Google took 35.6% while Baidu took 58.4%.

Some people thought it should be regarded as a warning from Google instead of a real action. However, such a warning seemed to be too furious.

After Google event, its American peers gave out their own opinions. Microsoft CEO Steve Ballmer said that Microsoft would not quit China. CISCO and HP refused to give comments about this case. Yahoo stood alongside Google and criticized the Chinese hackers’ attack towards Google’s network but was later criticized by its Chinese partner for the lack of evidence.

In January, Google China was still available and the so-called leave had not happened. No matter it was a show or warning from Google, the Chinese should draw a lesson from this case. If a foreign company like Google has to leave China, it is not good for China’s attracting foreign investment.