Google saves face with half-way retreat

By Wei Gu
March 23, 2010

Google  chose morals over profits in shutting down its China portal — and has already paid a hefty price as a result. Yet the search engine will keep a toehold in the world’s biggest market of internet users, re-routing searches to Hong Kong and keeping on staff. That means it won’t be starting from scratch if Beijing’s censors relax their grip in future.

Google threatened in January to stop censoring politically sensitive searches at Beijing’s behest. But it has only half pulled out. For now, users can still use its Hong Kong site — although there have been reports that the Chinese authorities are censoring sensitive searches such as the crackdown in Tiananmen Square in 1989.

That said, Google might have to wait a long time for Beijing to change its mind and, in the meantime, its presence on the ground could be a wasting asset. The firm is unlikely to keep much of its 30 percent market share of advertising revenues in China. Traffic may also fall if Chinese Internet users tire of slow connection times — assuming Beijing does not shut Google out completely.

Remaining employees may not stick around either. The Silicon Valley firm has been publicly accused of violating a written promise by government officials. It may be hard to keep the high calibre young engineers Google sought in the past if they sense their employer has little future in China.

Currently, China revenue is only 1-2 percent of Google’s annual total. But the growth trajectory — which Google is now giving up on — is exponential. As a result, the market values Chinese Internet companies highly. Rival Baidu  trades on Nasdaq at 41 times forecast 2011 earnings, double Google’s own rating. Since the U.S. firm said in mid-January that it intends to stop censoring search results in China, the stock has fallen about 6 percent, wiping away $11.6 billion in market capitalisation. During the same period, Baidu rose 40 percent, adding $5.5 billion of market capitalisation.

Google would have lost credibility among global users if it didn’t leave China in some form. Pulling out only half way saves the search giant some face, but with a hefty price tag.


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Nice move Google. China? It’s your turn

Posted by Story_Burn | Report as abusive

It’s a temporary setback. When margins are called on China’s investment in the derelict United States, Google can step in and buy the whole country for cash.

Then it’s free Moto Droids for all. You’ll see.

Posted by HBC | Report as abusive

Forget about money, it should be about freedom. Google is becoming what skynet was in the Terminator movies, and it’s best left to be in the hands of righteous persons

Posted by thep0lish | Report as abusive

Stupid move for Google’s investors and advertiser!

Posted by Icelink | Report as abusive

Knowledge is power — give the Chinese people more knowledge with an uncensored Internet, and the dictators with their propaganda will fall — that’s what this is all about. Perhaps at some future date, Google will be credited with real political change in China.

Posted by JJWest | Report as abusive

Google would have lost credibility among global users if it didn’t leave China in some form—yes,if they dont leave,Google is a chicken and all they have done in the past few month are nothing but hype.

Posted by officestory | Report as abusive

I actually respect Google for pulling out of that situation. China hacks them, and does not do anything to investigate the hackers. Also, I heavily disagree with censoring, so Google pulling out is also a good move in my opinion.

Posted by burningsteel | Report as abusive

You have to admire a company prepared to take the moral high ground …they deserve suport.

Posted by Wicki | Report as abusive

Chinese people are misinformed about lot of things prc government wants to hide (most of people do not know that taiwan is not a part of china, tiananmen protest, tibet protests). I personally think this could be the first step to a real change

Posted by T4l0n | Report as abusive

What’s morality? It’s a set of rules made by people to increase the interest of a majority of people within a society. By nature, morality restricts freedom of some kind. There’s no absolute freedom, or else there would be no freedom.
China, as a developing country, has its moral standard. And as a one-Party regime, it’s natural to censure anti-government content to preserve its power and maintain social stability.
U.S. as a developed democracy, has its own moral standard, which fits its own phase of development.
So, imposing one country’s moral standard to another is akin to imposing one country’s law to another country. Morality is the foundation of legal system, while law is the lowest moral standard.
Google’s moral pursuit for freedom tends to restrict China’s freedom to exercise its own legal power internally. And you cannot expect a government to make laws that threatens its own existence.

Posted by SamuelShenmail | Report as abusive

I was not surprised by this. I always read about cyber attacks originating from China so I don’t get why one can move there and not expect this every now and then. Either stay away, or move there and learn to deal with it.
Strategically, this is unwise. You can walk away from Cuba, North Korea or Zimbabwe. China is just too big for such moves. It’s not easy to convince investors of growth without China. I say improve your security measures and get back in there.

Posted by Tical | Report as abusive ts/articles/bull-market-financial-market s-greek-aid/3/23/2010/id/27420

Posted by Kina | Report as abusive

Politicians disguised as business heros and big business disguised as “moral” heros try to put in a FIX for a global economic train wreck. Sorry Google, sorry world government leaders, this nasty old boy is high functioning, and aside from indexed greed, not in need of a “FIX”, it’s doing exactly what it is designed to do.
We just don’t get it.

A spent piece of chariot trash from 1800BC the ego oriented, antiquated economic system continues to mock us and push us around. As history clearly warns us, communism, democracy, fascism, capitalism, dictatorships, or monarchies; this old boy has no loyalty to any; it pushes all who participate over the cliff of indebtedness.

Monopoly control over legal tender has a long, mean spirited, history. A system that places malignant cells of usury along side any economic concept, is just poor design and irrational behavior, as a fine art. No, rather than fix, we need to abandon and redesign around our intuitive limitations using todays behavioral economics. “Complaining is silly, do something or forget it.”

Posted by evolutis | Report as abusive