That Katy Perry song sounds so appropriate for what’s happening with Google’s operation in China. It has finally made a statement this Monday to retract from its agreement to censor Chinese search results. Google will start redirecting Google.cn to Google’s servers in Hong Kong which deliver uncensored results. (Ever since, Hong Kong was returned back to the Chinese government from the UK, it has received special exemption from the Chinese authority to operate as an independent region.)
On Google’s blog an article titled “A new approach to China: an update” Google blamed the move on the alleged cyber attacks originated from China to various US companies including itself. It has also posted an accessibility report to indicate which of the Google services are currently being blocked. Bold move Google!
Now to a more serious note… Was Google absolute right to do what it did? Was the Chinese government absolutely wrong to censor content on the Internet? Lastly, how will this affect the Internet users and companies in China?
We all know that the Chinese Internet market is the largest piece of the pie. That is to say there are more users in China than any other country in the world… surprised? However, looking at the revenue report from Google… the Chinese market was only about 2% of the total revenue… not a big number for a company of Google’s size. While its operations in China was growing at a rapid rate, censorship from the government greatly prohibited its every move. Youtube was blocked… Picasa partially blocked… so was Gmail at some point. This sort of a hostile landscape probably made it quite difficult for an open company like Google to compete with native Chinese companies who are in total compliance with state censorship laws. Therefore, in order for Google to operate in China it will have to essentially become one of the censor dogs…
Google CEO Eric Emerson Schmidt repeated said on numerous occasions – Google is not about revenue, it is about expediting the flow of information and innovation. However… here is the catch… he did sign an agreement with the Chinese government to perform censorship on its search results… Is it legal and totally righteous of them to pull out from something they agreed to?
My hunch is that… everyone thought of the Chinese market as the biggest pile of cash to be made. However, Google really wasn’t doing well in China to start with! It watched as competitors like Baidu continue to gain marketshare… not by innovation… but by simply doing what the government tells them to do. Not wanting more revenue? Give me a break… everyone wants more money… enough said.
One must understand, in such a sensitive country… politics and money are two of the dominating forces that drive its local economy. Political power = money, and the reverse is also true. This ill-designed system is being governed by a single political body that gains power by silencing the people who dare to speak up about its corruptions. Therefore, in order to keep this delicate platform, the Chinese like to keep its businesses local. They can’t possibly control a company like Google… at least not in the same way they do with Baidu!
So was it right for Google to pull out? As a strict legal matter, no it was not. You cannot change your mind about a legal agreement simply because you are not profiting from it to justify your costs. Was the Chinese government right to censor content to begin with? From a pure economic perspective, I have to say YES. By keeping the businesses local and discouraging foreign companies like Google, the Chinese economy is becoming self-sustainable and is growing at a rapid speed. There is corruption in the government, but they are not idiots. They designed the system, they know how to work it!
So who is this sudden game changer affecting? What are the end users saying? Well according to reports, there seems to be a divide… again…surprised? Some people have cursed Google to get out of China altogether. Others are saying they’ll just switch to Baidu. I think in the short-term Google’s exile will not likely affect the average Chinese user. When I was in China in 2008… people were already treating Baidu like their Google. Many people didn’t even know what Google was… others simply complained about its lack of localized Chinese results. However, in the long-term… the lack of competition is never a good sign for any industry.
Now the real beneficiary is definitely Baidu.com. It stock in China and US had gotten a much anticipated boost from all this. The same can be said for the Facebook clone – RenRen.com and video sharing site – TuDou.com. As Google said its long goodbyes to the Chinese market, I think there really wasn’t a real loser this time around. It looks to me that everyone went home with something in their pocket… Google has its publicity and seemed righteousness. The Chinese government successfully kept competition on the other side of the gate in order to grow its own economy. The users… well the users didn’t win anything but didn’t lose much either. We might even see a boom of local Chinese Internet start-ups because of this… especially when everyone knows that the government will help them kick their competitors out.
Update: GoDaddy.com has suspended registration of .cn domains in China due to the fact that the communist government is asking the company to submit personal information of its customers. I must say that I am quite disgusted by the Chinese government’s stance on these privacy issues.
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