Google’s jaw-dropping announcement is not about finding an excuse to leave China because it’s failing there. That and other rather ridiculous myths are exploded over here. I’ll just quote what the article say about that myth; read the whole thing for all he other myths. A fine piece.
Google’s China operations contribute a small fraction of the company’s overall revenue – the company doesn’t disclose the amount, but analysts estimate it was a few percent of its total $21.8 billion in 2008 revenue, or several hundred million dollars. But Google has made significant progress in China in recent years, raising its share of the Internet search market to roughly 36% in the fourth quarter of 2009 from 13% when it started its Chinese-language google.cn site in early 2006, according to data from research firm Analysys International.
Many other foreign companies doing business in China would gladly forgo big profits in the short term for comparable market-share growth in China—especially in an industry where China has more users than any other country (384 million according to the latest statistics). Google has also been particularly popular among the highly sought-after demographic of young, educated, white-collar urban professionals. The company’s powerful brand of business and ethics (“don’t be evil) has also earned it a fair amount of good will among Chinese Internet users, many of whom are now mourning its (still uncertain) fate. While rival Baidu still has a much larger 58% share of the search market, its brand has suffered as a result of scandals involving paid results and allegations of censorship of sensitive news stories.
Google doesn’t say if it’s profitable in China, but there’s certainly no reason to assume it’s not. Baidu, its chief rival, reported net profit of about $153 million on revenue of $468 million for 2008, when it said it had 6,387 employees. Google’s revenue would have perhaps half or two thirds that amount, but it likely has a much lower cost base in China than Baidu, since Google is believed to employ well under 1,000 employees in the country, and can use technology developed by its U.S. headquarters.
To make this kind of decision because business is poor at the moment makes no sense (though I am not convinced of the 36 percent market share figure, which seems awfully steep). Google knew this would be a long-term commitment with a lot of risk. They knew it might take many years, and it maintaining its operation in China meant very little skin off Google’s back.
James Fallows, as usual, is offering the sanest, most clear-headed and balanced opinions on the subject. Sample:
Two of the developments to date should not be surprising: the silence of the Chinese government, which is at its weakest in decision-making under time pressure; and the jubilation among some in the West, which I think reveals a pent-up reaction to endless stories about China’s rise and perhaps to recent Chinese government overreach. To me the more surprising — and significant — reaction is the clearly divided reactions within China, with some people reacting with nationalistic anger at Google’s insult but others taking the daring step of bringing flowers to the Google office etc.
Go to his blog and keep scrolling. Balanced, clear-headed and free from neurosis. How refreshing.
1
By Uln
Hi Richard,
It makes absolutely no business sense to leave China, even if G was losing money there (which I think it is not). Here is why:
1-Google is a company that sees long term. That is what it has done all it’s life, sit on the cash of Google Search and explore different fields to expand without worrying about the profits. China is a long term investment, today it is closed but tomorrow will be open. But what if Google is not there anymore to reap the benefits?
2- China is a fast changing society + Internet is a fast changing medium = Chinese Internet is the fastest and most unpredictable marketplace. There is no way for G (or for us) to know how it will be in 5 years. What is SURE is that if G continues to deliberately piss off the CCP, it will be erased from the country, including Google.com and all the G services.
3- Form the PR point of view, the move is way too risky: Americans might love this, but Google’s success was to operate as a truly global company, as opposed to Yahoo. It was the company of the free internets, OUR company, that is why we liked it. Now what if people start seeing Google as an arm of the United Stated? You bet in the long term it will hurt them in many places in the World, not least of all in Europe.
Of all the hypothesis I have been considering, Business is the first I eliminated, in a simple risk and return approach it doesn’tmake sense. In my opinion, the reason’s for Google move are a combination of three factors: ethical, personal and political (involvement with Democrat party)
Actually all these are aspect of the same problem: Company leaders that have been used to being World stars for all their careers, inflated with vanity and a distorted perception of their own power, let their company be utilized in the dirty political games between the USA and China. Now G has nothing to win there, and a lot to lose, it is going to hurt itself playing with immense forces that are way beyond Brin, Page or Schmidt’s control.
I warmly thank Google for daring to tell the CCP what many should have said before, and I am sure Google’s leaders are full of goodintentions. But overall, unless there is some key data still undisclosed, I think G has made a big mistake.
PS. sorry part of the text I am using is copied from my own website, hope that is OK.
January 16, 2010 @ 11:22 am | Comment
2
By richard
You’ve been doing an awesome job blogging this – I just saw yours posts today.
January 16, 2010 @ 11:41 am | Comment
3
By pug_ster
Meanwhile, rumor mills are telling Google’s bomboozle response is less about a cyberattack but rather a business failure by google.
http://www.forbes.com/2009/12/21/google-baidu-internet-intelligent-technology-fannin.html
Here’s an article from 12/21 last year about the possibility of google pulling out.
http://www.worldjournal.com/pages/full_news/push?article-Google+%E5%8E%BB%E5%B9%B4%E5%BA%95%E5%B0%B1%E7%88%86%E9%9B%A2%E8%81%B7%E6%BD%AE%20&id=5556058&instance=noon3
Here’s a link to a article to a Chinese website where people working for google China started to look for jobs in last November because they heard that google.cn is going to run down.
Personally, this cyberattack incident is more like a cheap PR stunt by Google.
January 16, 2010 @ 12:47 pm | Comment
4
By stuart
“I think G has made a big mistake.”
That presupposes that the longer term effects of cyber infiltration through its China offices would be offset by the returns from its China business.
They didn’t just wake up one morning and think “let’s play cat and mouse with the CCP”. Clearly they have reasons to believe that their China operation represents a potential cyber compromise to the wider organisation.
January 16, 2010 @ 12:55 pm | Comment
5
By Tom
WSJ reported that Sergey Brin was largely behind this decision. Eric Schmidt, being the only one of the triumvirate who is a businessman, was opposed. Two years ago, Larry Page voted with Schmidt and agreed to self-censor. This time around, Sergey appeared to have convinced Larry to change his vote.
Sergey Brin is a Russian Jew, who came to the United States at the age of 6 under one of those “wheat for Jews” deals between the US and the USSR. What kind of bedtime stories did he hear about the Communists when growing up in Maryland?
I think Uln is correct in fearing that Google is “playing with immesne forces that are way beyond Brin, Page or Schmidt’s control.” What worries me is the approbation being showered on Google. I fear that Congress is going to be enthusiastic and actually do something, which is always dangerous.
On the other hand, the timing could be worse, I suppose. This could’ve happened during the Olympic Torch run, for example, or the Shanghai Expo. That would really have been playing with fire. And the executive branch has so far been very level-headed about this. Hillary Clinton limited her statements strictly to the hacking. (Censorship? What censorship?) Very diplomatic of her — of course, she’s a diplomat now.
January 16, 2010 @ 1:37 pm | Comment
6
By Michael
It may not be good business sense for Google to leave China, but this is not just about money. Google should leave China because its main competitor is not Baidu but the Chinese government.
January 16, 2010 @ 2:33 pm | Comment
7
By Uln
@Stuart – OK, all I said above is *with the info in hand today*. I don’t discard the possibility that there is still undisclosed information, such as massive IP theft, etc, that would explain G’s actions. Actually, I am quite inclined to believe it because I know the leaders of G are no idiots. But even intelligent people do dumb things, especially when they go into a field that is not theirs…
@Richard – Thanks. The way I am approaching this I feel a bit uncomfortable actually. I was fast to criticize Google when they censored chrter 08, and now that they are fighting for freedom, I am not sure how consistent it is to criticize them again. I do support G and admire them for their strong principles, my first reaction was idealistic like yours here. But thinking it over, I just came to the conclusion this was not the best way to do it.
And needless to say, when I say G is wrong here, nobody should imply the other party is right. The CCP is the big culprit, they are the shame of the internet and the shame of China today. But I consider this to be obvious, and already known to anyone who reads our blogs. That is why I focused all my writing on G’s decision and its practical consequences.
January 16, 2010 @ 2:37 pm | Comment
8
By ecodelta
“its main competitor is not ….. but the Chinese government.”
I think that can be said for other companies and technology fields.
January 16, 2010 @ 4:01 pm | Comment
9
By ecodelta
“it’s worth remembering that this is a lose-lose-lose scenario. The most likely outcome is that Google loses access to an important market, Chinese customers lose access to its services, and the government loses face.”
It is going to be interesting how this mess get cleared up. Some commentators are not of the same opinion, but I consider that the ball is very much on Beijing government roof.
It is time to go beyond just saving face… to be able to recover it. Are they up to the task?
January 16, 2010 @ 5:27 pm | Comment
10
By ecodelta
It is an ill wind that brings no good to anyone.
January 16, 2010 @ 5:28 pm | Comment
11
By Serve the People
It doesn’t appear that Google will stop doing business in China. They will still sell ad spaces on their google.com site to Chinese companies. This actually is where the majority of their revenue comes.
Nevertheless I still support Google to shut down google.cn to put up a fight. It will not bring down the Great Firewall right now, but enough sympathy and support will be generated within China and even within the communist party.
In the earlier decades of reform and opening up to the world, the progressives fought the conservatives over market economy, capitalism, and private property rights. The openness of Internet is the latest battle, and Google is now leading a charge.
January 16, 2010 @ 8:35 pm | Comment
12
By spandrell
Google’s not fighting for freedom, its fighting for the integrity of their IP. No business fights for freedom people, wake up. Of course they talk about censorship blablabla because public opinion in the west is as moralistic as in the 14th century, but the world doesn’t work like that.
January 16, 2010 @ 11:14 pm | Comment
13
By Zhe
If you search for “Google事件真相”, you might find an interesting page saying the reason for its quiting is actually because a CCP spy checked out the whole gmail source code, and google won’t take the risk of losing all its secrets.
January 16, 2010 @ 11:26 pm | Comment
14
By Bryan
“Google’s not fighting for freedom, its fighting for the integrity of their IP”
Exactly! I’m amazed that this hasn’t been discussed more either. The Mainland is an extremely hostile environment for Google to operate in. The Chinese government was obviously not helpful (and it could be argued, completely failed) in ensuring a safe and secure internet space (I’m referring to malicious hacking activities) for companies to conduct business within.
I have no problem with this either. If my tech secrets were placed at a constant high level of risk all the time from not only independent hackers but quite possibly government sponsored entitities, I wouldn’t think twice about playing hardball.
My attitude with Google was that they finally said…”enough is enough…stop trying to steal our sh*t. You go clean up your playground and then we’ll talk”.
January 17, 2010 @ 12:10 am | Comment
15
By HongXing
If you don’t like your computers hacked, get better security or don’t use computers. Hacking is a normal intelligence operation, only a child would cry about it. “Oh my god! You hacked my computers!!!”. Of course I hacked your computers, were you born yesterday?
January 17, 2010 @ 4:17 am | Comment
16
By ecodelta
More info about Google affair. It seems insider job triggered all
http://www.zonaeuropa.com/201001b.brief.htm#012
January 17, 2010 @ 7:55 am | Comment
17
By ecodelta
If what is said in the link above is true, then that explain also the new stand of Goggle about censorship in China.
They was pact with… what it seems now, the devil.
Ok. We censor to comply with to your…ahem… rules and regulations, so we can do business in China and follow your laws… which should also protect us.
Pacts with the devil usually end bad, no matter what the devil promises: eternal youth, eternal life, soul of a loved one or level business play field.
Now the pact has been broken, by the devil. No level play field for me.. no censorship for you.
More… in order for Goggle not to loose its soul (I mean IP, source code and much else) they just get away as fast as they can.
Moral of the story: If your technology can be easily copied (like software,not heavy hardware), have a police of complete trust on your technical stuff and puts no restriction to flow information within your company…. don’t develop in CCP-China.
January 17, 2010 @ 8:45 am | Comment
18
By ecodelta
Damn!
They made a pact with…
a policy of complete trust on your technical staff and puts no restriction…
January 17, 2010 @ 8:48 am | Comment
19
By pug_ster
@Ecodelta,
Your theories are hilarious. As Bryan says, why does google complain about censorship after China allegedly stole gmail code? If China had confessed to stealing the code, does it improve censorship in China?
Even if China stole gmail code for IP purposes, what are they going to use it for? Cmail (China Mail) that will compete with gmail?
January 17, 2010 @ 9:05 am | Comment
20
By stuart
“It seems insider job triggered all”
What were the odds? This was never about the censorship bit.
January 17, 2010 @ 9:06 am | Comment
21
By ecodelta
Read the link pug. You even has there the link to the original post in Chinese.
There was an interest to get the code.
You surprise me pug, you should be smarter than that, or….. I better not say.
What can be do with the code? A lot of things. From replication of the services provided by Goggle by a local partner to access realm of information, not only activist mail accounts.
Many companies are starting to use cloud services instead of their local IT infrastructure. If someone can get the knowledge to access it….
If a company’s cloud is proved to be unsafe, for whatever reason… end of business.
The censorship dropping statement is just a side effect. Take as a tit for tat, although rather symbolic.
January 17, 2010 @ 9:18 am | Comment
22
By ecodelta
@pug
I always find fascinating to see into which mental, logical and argumentation contortions have to get into, those that are used to censor access to information and choke and muffle the voices of their own people voices, when they have to defend their acts in front of others they cannot silence so easily or restrict their access to information.
January 17, 2010 @ 9:27 am | Comment
23
By pug_ster
Cloud services? It is gmail code, not cloud services code.
January 17, 2010 @ 9:39 am | Comment
24
By pug_ster
@Ecodelta,
What I find it more scary than censorship is mis-information and how it stupify ordinary people as a result. As the result of Bush’s mis-information campaign, Americans were stupified that Saddam was the cause of 9/11 and we fought the Iraq war. The same can be used by google, they are complaining China about censorship over their gmail systems being hacked. If google is a ‘don’t be evil’ company, why don’t they tell the government that they believe there’s ccp spies who stole their code and call it on China’s bluff? Instead, they threaten to pull out from google.cn which it seem to plan to do anyway.
January 17, 2010 @ 9:52 am | Comment
25
By Richard
Pug, we’re at the point where no one takes anything you say seriously. Sorry, you brought that on yourself. Your attempt to draw some kind of a parallel between Google’s announcement regarding China to Bush’s lies about Iraq’s role in 911 is a perfect example of how you work here. You’re the worm inside the tomato, trying to corrupt it from the inside out. Kind of like the CPP mole who was stealing code at Google. Arguing rationally with you is impossible, and from now on I’m just going to call you out as a troll and not get into another asinine tug-of-war with you.
Eco, that is one sensational link from ESWN – thanks for that.
January 17, 2010 @ 10:33 am | Comment
26
By Ni Da Ye
Google only had 14.3% of China market as of 09, 2009 according to comScore. Baidu had more than 60%.
January 17, 2010 @ 11:00 am | Comment
27
By ecodelta
@Ni DA Ye
Closer to a 20% actually.
Any company, foreign or local, will dream to get such a percentage of China´s market.
January 17, 2010 @ 5:36 pm | Comment
28
By ecodelta
pug, pug, pug…. my dear troll.
Your really have reached your limit with that one.
You should take some extra courses at net nanny elves school to improve. Maybe even some couching from some graduated or Phd fellow elves.
January 17, 2010 @ 5:39 pm | Comment
29
By ecodelta
@pug
Now that you talk about Iraq… Here is how evil US treated one of the most embarrassing acts ther
“At the same time, Abu Ghraib also helps to illustrate the point I’m trying to make about open political systems. How did we, or the rest of the world, even find out about Abu Ghraib? The American military began looking into a soldier’s complaint; American news organizations found out about the probe and wrote or broadcast stories about it, despite considerable resistance from the US government; Congress proceeded to examine what happened and held public hearings, and some of those who were involved have been prosecuted. Let’s compare this to the way the Chinese government has handled the events of June 4, 1989, in which a number of unarmed civilians were shot to death. After nearly eighteen years, there have been no press investigations, no legislative investigations. It’s still a subject that cannot be freely debated or even discussed in China.”
Can you…. see the difference?
January 17, 2010 @ 6:13 pm | Comment
30
By ecodelta
Original link here
http://tinyurl.com/yk683go
January 17, 2010 @ 6:15 pm | Comment
31
By Serve the People
I have been thinking what the best way is to bring down the GFW. It is fine for Google to put up a fight for a while, but in the long run external pressures are most effective if they come from multinational organizations. WTO is arguably the best choice. There should be a way to frame the blocking of websites as a violation of free trade.
The progressives in the CCP can use such an argument as a reform agenda to dismantle the GFW. They can argue that an Open Net fosters innovation, encourages competition and in the long run helps China modernize. Open up the Internet is the 21st century’s version of Deng Xiaoping’s reform and openness.
January 18, 2010 @ 12:23 am | Comment
32
By merp
There should be a way to frame the blocking of websites as a violation of free trade.
Then should embargoes on China for certain technologies be considered a violation of free trade?
And should American mega-corporations be taken to task with monopoly laws?
January 18, 2010 @ 12:53 am | Comment
33
By ecodelta
Hi serve.
You may find this post amusing.
http://www.zonaeuropa.com/20100118_1.htm
January 18, 2010 @ 1:09 am | Comment
34
By Serve the People
merp: I offer constructive criticism of some of the government policies. Having an open, uncensored Internet is in the nation’s interest. As I said, it will make China more innovative and competitive. If WTO sides with Google, the reformers in China will have more ammunition when they push for liberal economic policies. I only have the best interest of China in my heart.
January 18, 2010 @ 11:11 am | Comment
35
By Richard
And that’s why I’ve never deleted or held any of your comments, even if I often disagree with you.
January 18, 2010 @ 11:28 am | Comment
36
By Mike Goldthorpe
I’m always interested as to when comments are deemed un-Chinese because they do not flatter China (the country) as opposed to the government of the People’s Republic. Most “criticisms of China” are not aimed at the country or the people but the CCP. However, the Defenders of China always appear to suggets that the CCP IS China.
This Google spat is nothing to do with China as such – it is a spat between the PRC government and a large IT company.
Being a multinationalist, I prefer China, India and other nations to reach their full potential. It’s not a race to see who is best, all of humanity should profit.
January 18, 2010 @ 11:32 am | Comment
37
By Serve the People
This a very wrong view point: China and the Chinese people are all wonderful and innocent, but CCP is Darth Vader evil; if given a chance the people will free themselves from the shackles of the party tyranny. Let me just say that CCP is an integral part of China and it will be there for generations if not forever. Just like China and the Chinese people, there are good things and bad things in the party and the government. Overall it is a positive force for the country and does more good than evil. The vast majority of the party members are patriotic and uncorrupt. They have a strong sense of nationhood and care deeply about the well being of the people and the future of the People’s Republic. The impressive developments in recent decades are all due to the policies initiated and implemented by the party. Future economic and social improvements will almost certainly come from the progressive forces within the party.
January 18, 2010 @ 9:43 pm | Comment
38
By ecodelta
@serve
Then why not do a bi party system, and people can choose among them? A progressive party and a regressive party.
I do not completely agree with you about the participation of the party in recent Chinese development. Only when the party stepped aside, a little, could china move forward at last. It is the Chinese people who raised the country, …and the party raised with it.
The party benefited from the hard work and suffering of the people. And it seems that know that situation has improved, the party wants again to clamp down on China’s development.
If there is a force that really prevents china to develop is full potential is its socio/political system. Type to upgrade up serve.
There are some things that China could copy from other countries, they would benefit the well being of the country and its international status immensely. And, by the way, they are not IP protected.
January 18, 2010 @ 10:31 pm | Comment
39
By ecodelta
“Let me just say that CCP is an integral part of China ”
When someone tells me that is an integral part of me, I get the shivers.
Worst than a marriage without the possibility of a divorce!
January 18, 2010 @ 10:45 pm | Comment
40
By Si
@serve
The impressive developments in recent decades are all due to the policies initiated and implemented by the party which lessened, not increased party power (a tacit acknowledgement that the party was the problem for the first 30 years in power). Parts of the economy controlled directly by the party continue to be a drain, eg SOEs and the power wielded by local officials has led to massive misallocation of funds, eg the real estate bubble.
Corrected for you. I believe you maybe smart enough to eventually realise Hayek was right, but I suspect it will take a severe downturn in the economy and much breast beating before you work it out. The Chinese people, left in peace, will be prosperous without the blood sucking party to hinder them (eg Hong Kong). The government is usually the problem, not the solution.
January 19, 2010 @ 12:02 am | Comment
41
By Mike Goldthorpe
China nda the Chinese people are ALL wonderful and innocent? Most Party members are patriotic and uncorrupt?
😀
Nothing is forever, not even the CCP. Already it’s not the CCP Mao envisaged. The recent developements are as a result of common sense – even if the KMT had stayed in power, I think everything would have been the same (except, of course, much earlier!).
If all party memebers were as virtuous as some suggest, why is corruption such a big issue to the CCP higher echelons?
The CCP is an integral part of China only in that it is the present government of China. It is not a genetically Chinese thing.
Why make it sound as a happy coordinated group effort? How many riots in China last year (against party policies, against corruption)? How many ethnic riots (again, initiated by party policies and corruption)? Easy to ppoint the finger at foreign based stirrers….but if the people are happy, then they wouldn’t listen to them, would they? Mind you, given that there’s censorship to “protect the people” then how is it that these splittists are so powerful?
😀
January 19, 2010 @ 4:45 am | Comment
42
By newox1
Chinese actress Zhang Ziyi is suspected of delaying the release of donation funds she had garnered for victims of the 2008 Szechuan earthquake during her fundraising activities at the Cannes Film Festival that same year.
Zhang’s fiance, multi-millionaire Vivi Nevo, had reportedly set up the Zhang Ziyi Foundation on her behalf in the United States to conduct fundraising activities for the earthquake victims.
Citing information from Nevo’s close friend in Hong Kong, Chinese media reports alleged that the Foundation’s donation funds, earmarked for the Chinese Red Cross Foundation of at least$2 million, were channelled into Zhang’s personal overseas account and remained there for almost 18 months after her fundraising efforts at the film festival.
February 6, 2010 @ 12:48 am | Comment
43
By Richard
Why are you spamming my comment threads with this?
February 6, 2010 @ 1:00 am | Comment