Google Still Making Money in China
10 Interesting Points About the Google China Move
Google's move to shutter Google.cn and reroute users to Google.hk March 22 represents an interesting move on the part of the search engine, which trails Chinese search leader Baidu in that country.
Google's move covers its Google Search, Google News and Google Images sites on Google.cn, all of which users may access uncensored at Google's Hong Kong site Google.com.hk in simplified Chinese.
Gartner analyst Whit Andrews told eWEEK Google essentially thought it would take the business out of China where it can't tolerate censorship, then "Let's see if I can locate it nearby [Hong Kong] in a way that would give China the possibility to save face and give me a way for me to save face. Well, it doesn't look like it's working, does it?"
Andrews said that from the Chinese perspective, censorship is non-negotiable. "Their take is 'This is a law. We put the law in and now you have to follow it. If you don't follow it, you don't get to do business with us."
Here are some interesting points about this story, which won't end with Google's latest move.
1) How Can Google Get Away with Rerouting Searches to Hong Kong?
For citizens of countries with one government, this is an interesting point. China has had since the 1980s a "One Country, Two Systems" policy. This holds that while there is only one China, Hong Kong and other areas enjoy their own economic and political systems.
Google, as Danny Sullivan noted, is looking to do an end-run around China's censorship laws with this move. While Google's legal eagle David Drummond said in a statement that "we very much hope that the Chinese government respects our decision," there is certainly some ambiguity as to whether this is legal or not, as Sullivan noted: "If it's entirely legal, then Google shouldn't need to be hoping."
2) To Whit
To our ears, this sounds like a tightrope walk to trouble. Gartner's Andrews added: "If Google said this was illegal, then you know China would have to block it. China can't have someone thwarting them." What Google has to say is it believes it's legal, but that it isn't sure (hence, the word "hope" in Drummond's statement).
Indeed, Google co-founder Sergey Brin told the New York Times: "We got reasonable indications that this was O.K. We can't be completely confident." This fuzziness keeps Google from seeming to be blatantly disregarding Chinese law, even though the Chinese government is bound to see this as a transgression.
3) Censorship Still Very Much in Effect on Google.hk
While searches within the Google.hk are not censored by Google, they will still be affected by China's keyword filtering, so some queries won't not get through to google.com.hk search engine, according to censorship expert Nart Villeneuve, who noted:
"Even if a user in China uses search queries that are not filtered by China and retrieves results from Google's .hk version, they will still be affected by China's filtering if they click on the link and try and view those results directly. What's the difference? Users in China will be affected by China's filtering, not Google's. The difference is in the user's experience - instead of retrieving results and carrying on as if censorship did not exist, the user now experiences the censorship first hand."
Google Still Making Money in China
4) So Google is Still in China, Right?
Yes, for now. Google left its sales and research and development teams there, which means some 600 Google China employees still have jobs. Google doesn't want to leave China, where there are 400 million Internet users ripe to put digital ads in front of via search and other Web applications.
5) That Means Google Will Still Make Money in China
Jefferies and Co. analysts said that as long as the authorities allow mainland users to access Google's Hong Kong portal, the Chinese advertisers would likely continue to advertise on that site. Why not? There is still good real estate in Google search, which garners about 33 percent of the market share in China, compared to Baidu's 63 percent plot.
6) But Google Is Vulnerable...
Jefferies analysts added this caveat: "By redirecting China traffic to an uncensored portal in Hong Kong, Google has effectively put its China business at the mercy of Chinese authorities, who could potentially cut off some or all levels of access to the Hong Kong portal from mainland China." Expect an angry Chinese government to do everything it can to stymie Google.
7) Can Google Preserve Its Other Businesses?
Gartner's Andrews said it makes sense that Google would go out of its way to preserve parts of its business that don't have anything to do with censorship. This would include, for example, selling its Android-based Nexus One phones in that country.
However, Google's Chinese partners will be reticent to do business with Google for fear of retribution from the Chinese government. "Partners are concerned the government will see doing business with Google as disloyal," Andrews said.
8) And Yet...
James McGregor of APCO Worldwide in Beijing, who wrote the 2005 business book on China "One Billion Customers" said China had no interest in thwarting innovation of Android and other Google products. "They need Google in many ways," McGregor told CBS Marketwatch.
9) Google to Expand Elsewhere in Asia?
Some believe this move will pressure Google to expand in South Korea and Japan to retain a presence in Asia-Pacific markets. Google commands less than 50 percent of searches in Japan and 8 percent in South Korea, researcher comScore said.
10) To Baidu, Go the Spoils
With the Chinese government likely to further clamp down on Google and Chinese citizens upset about Google shuttering Google.cn, Baidu stands to gain from this standoff. Expect the Google of China to gain some percentage points from Google over this affair.