14 DAY TRIAL // Google has made one of the biggest moves in its history by saying that it wants to drop all censorship in China, even at the risk of leaving the market altogether. This is a bold move by the company and a very rare one among big foreign companies with interests in China. Some human rights activists commanded Google on the decision while others remained skeptic of either Google's motives or its further actions. The company has always had trouble with the Chinese authorities, but these intensified in the past year. The tipping point was a large-scale coordinated attack, originating from China, on the company's infrastructure targeting its Gmail service which Google claims was part of a broader attack which targeted as much as 20 large US companies. Other reports put the figure at over 30.
Gmail under attack
"In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident--albeit a significant one--was something quite different," David Drummond, SVP, Corporate Development, and chief legal officer at Google, said. "First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--have been similarly targeted," he added.
Google says it was the target of powerful attack aimed primarily at its email service Gmail. The company says its investigation uncovered that the likely goal of the attack was accessing the email accounts of Chinese human rights activists. You can read a detailed overview of the atack over at the Security section. Google says that the attack wasn't successful in reaching its goal and that only two accounts were slightly compromised and that it has already deployed new measures to counter some of the attack mechanism used. However, the attack made Google reconsider its ties with China.
Bold move
"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," Drummond said.
Google isn't outright saying that it will stop censoring the search results in China, just that it will no longer do so voluntarily. The company says it will reach out to Chinese authorities to look for a way to resolve this impasse.
"[O]ver 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," Drummond added.
However, it is highly unlikely that China, which has been critical of Google times and times again, will agree to allow it to operate a censorship-free search engine inside the country. At the same time, experts in the country's government policies and dealings with foreign businesses say that Google's way of doing this, by openly disclosing its intentions, albeit solely on the English version of the blog, negates any chance that China will accept any form of negotiation.
With the Chinese unlikely to negotiate and Google seemingly determined to stop censoring the results, the most probable outcome is that Google will stop all operations in the country, a possibility the company is seriously considering. If this happens, it will be the first major company to make such a clear rebuke of China's policies and take such a definitive stance.
Google in China
Google entered the Chinese market four years ago, a very controversial move at the time. In order to launch a local version of the search engine, Google agreed to censor some results and follow Chinese laws and regulations. Critics said that was a clear move against the company's own motto "Don't be evil" and that it was tramping on its own corporate principles by pursuing its economic interests rather than its moral ones. The company countered by saying that it had to choose the lesser of two evils and that the benefits of bringing information to the Chinese people outweighed its reluctance against the censorship policies. However, at the time, Google said that it would monitor the conditions in China and would not be willing to make any further compromises.
Google.cn holds as much as a third of the Chinese search market, but it is far behind local search engine Baidu which has at least double that. Between the two, they command virtually the entire search space as other players all have under one percent. Yet, Google has been losing market share recently and shows no signs of reversing that trend. Most analysts believe that Google has no realistic chance of overcoming Baidu, which works closely with the government, or even gaining more market share in the country. At the same time, Google's revenues from China are estimated to be small, a few percentages of the $22 billion Google pulls in annually. The most optimistic figures put revenue at $600 million, not insignificant but nothing Google couldn't live without.
Standing up to human rights or shrewd business move
Google's moderate success in China, though, has led some to be skeptical of the company's motives behind the sudden decision. Some are arguing that Google has very little to lose by pulling out of China but a lot to gain, at least in the short term. China is the largest Internet market in the world with 338 million people online and is expected to grow significantly in the near term. Coupled with China's sustained economic growth it makes the country a very attractive market for foreign companies, web companies in particular. Google knows this, of course, and this was the reason why it agreed to the censorship in the first place.
Yet, outside companies rarely make too much headway by themselves in the country and local competitors are clearly favored. By shutting down Google.cn, the company isn't loosing too much for now, but may end up regretting it several years down the line. At the same time, it would give the company a much needed public image boost and may redeem it for its past transgressions. This could prove crucial especially now as the company is under increased scrutiny over its growing domination online.
All in all, Google's financial losses in China may not be offset by the goodwill it's likely to gain out of the move. It's clear that Google has not made this decision lightly and, when weighting in all the factors, its motivation isn't purely humanitarian, but it's likely not a pure business move either. It will be interesting to see how China responds to this and how things will develop and it will be easier to reach a conclusion if and when Google actually pulls out.