Why Google Is Quitting China

Discussion in 'China' started by Vinod2070, Jan 31, 2010.

  1. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Why Google Is Quitting China

    Rebecca Fannin, 01.15.10, 04:40 PM EST It's not censorship. The search giant just couldn't compete with Baidu.

    [​IMG] [​IMG] [​IMG] It's easy to give up if you've already lost the battle. And Google is doing just that in China. Eric Schmidt's move to quit offering a censored Google.cn search engine to the Chinese market has been read by idealists as the right thing to do. But it is first a business decision.

    Even though Google's ( GOOG - news - people ) market share climbed from 15% in mid-2006 to 31% today, the company had hoped for a bigger share by now. Kai-Fu Lee, Google China's former president, told me in 2006 that Google not only wanted to have a competitive product to Baidu's, the local search leader, but a superior product. This didn't happen: Baidu has only increased its market share, going from 47% in mid-2006 to 64% today. That's a big lead.

    Baidu, started by China-born entrepreneur Robin Li in late 1999 just as Larry Page and Sergey Brin were cranking up Google in Silicon Valley, understands the local Chinese market better than Google's Mountain View team.

    Google fumbled with an initially inferior Chinese search engine launched in 2000, while Baidu grabbed the lead in China--and kept it--with several innovative search features customized for local tastes. Baidu introduced community-oriented services that appealed to Chinese Internet users, including bulletin boards where leads on information could be exchanged--a service that Google China's former president Kai-Fu Lee dismissed as having nothing to do with search. Baidu also offered instant messaging, a hit with China's Netizens.

    Plus, Baidu was first to the market with mobile search and information offered up in multimedia, including video clips. Baidu also set up a national network of advertising resellers in 200 Chinese cities to educate businesses about the power of online advertising--a step that Google did not take.

    Baidu's search feature for music also proved highly popular. Google, realizing the potentially illegal nature of the free music downloads, opted to provide links to music stores instead. Baidu later began collaborating with music labels on authorized downloads.

    One other key factor put Baidu in the lead: Its search technology was considered superior to Google's in the Mandarin language. Scrambling to catch up, in 2005 Google hired the experienced Lee as its president from Microsoft ( MSFT - news - people ). Then in 2006 Google launched its first Chinese-language search engine run from China, Google.cn. With Lee at the helm, Google recruited dozens of top engineers and linguists to its Beijing headquarters to perfect search results on Google.cn. Working at the towering headquarters of Google China at Zhongguancun Software Park in northwestern Beijing, some 100 engineers wrote codes to deal with inputting Pinyin or Roman letters to signify Mandarin sounds and such intricate tasks as delineating words in Chinese characteristics that don't clearly define white spaces.

    The efforts paid off with speedier and more precise search results as well as more reliable service. But no matter the global brand name, the maximized effort and the financial resources, Google's Chinese search engine couldn't trump Baidu.

    Perhaps Google should have turned over its business to local rival Baidu and let Baidu run with it. There is a precedent. Back in 2005 Jerry Yang turned over the management reins for Yahoo! ( YHOO - news - people ) in China to Jack Ma, the charismatic leader of China's e-commerce powerhouse Alibaba. Yang knew that Ma, thinking local, acting local, would have a better shot at getting the right formula for China.

    Granted this is still a work in progress as Yahoo! refines its features for the Chinese market. But as Zeng Ming, former president of Yahoo! China, told me, "The net is about culture. You can't have expats running it."
    Indeed, why give up now--unless you realize there's no way you're ever going to win the race. After all, Page and Brin had already crossed the line back in 2006 by agreeing to have their new Google.cn, run from China, subject to censorship. They didn't have much choice. All companies doing business in China follow the same Chinese government rules. Yes, Baidu's search results are also censored.

    It wasn't all that long ago--2004--that it looked like Google might use Baidu as its entry route. Google invested $5 million in Baidu for a 2.6% stake but shifted strategy in mid-2006 by selling those shares for more than $60 million and rolling out Google.cn the same year. In hindsight, and given its bumpy history in China and this latest jockeying with the Chinese government, maybe Google should have pursued the go-with-Baidu strategy.
    If Google exits the $300 million Chinese search market now, it's giving Baidu runway to be a monopoly. And if that happens, Baidu has a shot at becoming the world's dominant search company (it's already entered Japan) by sheer arithmetic alone.

    By serving China's nearly 300 million Internet users and 670 million mobile phone users--both the world's largest markets--Baidu may someday be bigger than Google globally, something Robin Li once told me he has no doubts will happen.

    Rebecca A. Fannin is an internationally recognized author and journalist who has been writing about entrepreneurship and innovation for nearly 20 years. Her book, Silicon Dragon, was published by McGraw-Hill in 2008 and translated into several languages. During the height of the dot-com boom from 1999-2001, she was international news editor at Red Herring, later joining the Asian Venture Capital Journal as international editor and writing for several leading business publications, including Inc., The Deal, Worth, CEO and Fast Company. She also authored "A New Dawn" for KPMG in 2009. Fannin has lectured at several universities in Asia and the U.S., and has made numerous public speaking appearances worldwide. For more info, see www.rebeccafannin.com.
     
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  3. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    An interesting take on the reasons for Google leaving China.

    One may not agree with all of China's restrictions on the internet users, one can't disagree that as a sovereign nation, they have a right to do so. Anyone wanting to do business has to respect that right.
     
  4. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Microsoft's Ballmer Calls Out Google Over China Stance

    January 22, 2010 - 9:50 am
    [​IMG]
    Christopher HelmanBio | Email
    Christopher Helman is the Southwest Bureau Chief of Forbes, based in Houston


    Microsoft Chief Executive Steve Ballmer, in a speech to oil company executives in Houston on Thursday, criticized Google for its threats to leave China after cyberattacks allegedly launched by Chinese hackers.

    "People are always trying to break into other people's data," said Ballmer. "There's always somebody trying to break into Microsoft."
    Ballmer suggested that Google's decision to no longer filter out internet searches objectionable to the Chinese government was an irrational business decision. After all, Ballmer said, the U.S. imports oil from Saudi Arabia despite the censorship that goes on in that country.

    "The U.S. is the most extreme when it comes to free speech," said Ballmer, noting however that even the U.S. bans child pornography, while France bans internet access to Nazi imagery.

    Ballmer said Microsoft would comply with China's censorship requests, just as it follows the laws of every country where it does business.
    "If the Chinese government gives us proper legal notice, we'll take that piece of information out of the Bing search engine," said Ballmer, adding that outside China people will know what searches Microsoft is blocking on Beijing's behalf.

    Ballmer's comments were during the Q&A session of a keynote speech he gave to a Microsoft-sponsored energy industry conference. He lauded oil and gas exploration companies for pushing advances in computing that give them the "ability to model the real world in the virtual world." To process seismic data gathered from oil and gas fields, oilfield service companies like Schlumberger employ server farms with as many as 30,000 servers working in parallel.

    Ballmer talked up Microsoft's partnership with Halliburton's Landmark Graphics division to devise software enabling three-dimensional visualization of oil and gas reservoirs. The software system is navigated by geoscientists using the game controllers for Microsoft's Xbox system. "I kept telling people our investments in the gaming business are relevant to industry," Ballmer said.
     
  5. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Microsoft's 'Don't Be Evil' Dilemma

    Andy Greenberg, 01.21.10, 06:00 PM EST As Google promises to stop censorship in China, free speech criticism is shifting to its biggest rival.

    When Google announced last week that it would end its controversial practice of censoring search results in China, it pitted itself in a free speech battle against one of the world's most Internet-restrictive regimes. But it may have also thrown down the gauntlet to a different adversary: Microsoft.

    Since it launched a Chinese-language version of its search engine Bing in June of last year, Microsoft ( MSFT - news - people ) has carefully filtered its results to avoid politically incendiary topics that could tempt China's censors to block the site from Chinese eyes. A few quick searches on its simplified Chinese-language site--the written language used by mainland Chinese--show that Bing hides content referring to the Tiananmen Square massacre of 1989 and the Chinese Wikipedia page for the Cultural Revolution, which includes an estimate of the death toll from that period's violence.

    In a recent test of Bing's Arabic-language service, Helmi Noman, a researcher with the Berkman Center for Internet and Society, also found that searches on sexually explicit and gay- and lesbian-related words generated the message "blocked in your region." Noman says that Google ( GOOG - news - people ) doesn't censor the same words in any Middle Eastern or North African nations.

    Google, of course, has long performed self-censorship to avoid conflict with the Chinese government. But by declaring a break with China's propaganda code, Google may be setting up Microsoft as the American tech world's new No. 1 enemy of free expression.

    "It's exciting to see Google standing up instead of being an accomplice to China's censors," says Lucie Morillon, head of free speech group Reporters Without Borders' Internet Freedom desk. "The fact that Microsoft isn't following them is a huge disappointment."

    In China, Bing is hardly the only search engine to filter its results. Baidu, the country's dominant search engine with more than two-thirds market share, also aggressively filters Web content, as does Yahoo! ( YHOO - news - people ) China. But given that Baidu is a Chinese company based in Beijing, and Yahoo! China is operated by Hangzhou-based Alibaba, Microsoft may soon be the only American company directly participating in China's censorship regime.

    "There's an expectation for U.S. companies to act responsibly abroad," says Arvind Ganesan, director of the business and human rights program for Human Rights Watch. "Bing should be an ambassador for openness, and I would hope they'd take up that mantel."

    In an e-mailed statement, a Microsoft spokesman said the company has no plans to pull Bing or any other Microsoft service from the Chinese market. "As a global company, we will continue to comply with applicable local law," he wrote, adding that Microsoft will continue to "protect the rights of its users" and will maintain its participation in the Global Network Initiative, an Internet freedom advocacy group that counts Google and Yahoo! as members.

    Microsoft didn't immediately respond to requests for comment regarding its Arabic-language search censorship.

    Microsoft, in some sense, has the least to lose by ending its foray into China's thorny search engine battles. By recent counts, Bing has less than 1% of the country's search market share compared to Google's 30% or so.

    But the tech giant does have a large stake in keeping its position in the country's software industry, where it sells Windows and Microsoft Office to one of the world's fastest-growing computer markets.

    Microsoft may also see Google's threatened pullout from China as an opportunity for Bing to gain millions of new adherents, given China's massive Web audience--384 million users according to the most recent government figures. A Microsoft spokesperson told Reuters in December that search had become the company's top priority in China.

    Microsoft has long taken a more conservative approach in China, censoring more than Google to avoid riling the country's government. In a study released in 2008 Toronto University's Open Net Initiative showed that Microsoft's MSN search engine censored at least one result for 51 out of 60 politically-sensitive terms, while Baidu hid results for 50 of the search terms and Google censored results for only 34 of them. (See: "China's Overeager American Censors.")

    But Danny O'Brien, a digital civil liberties activist with the Electronic Frontier Foundation, argues that Microsoft might actually gain users by taking a more liberal approach and offering more information than Baidu. "At this point, it behooves Bing to become the least censored search engine in China," he says. "Maybe it's time it used its lack of obedience to what the Chinese authorities want as a selling point. Perhaps free speech is part of the brand of American companies abroad."
     
  6. tarunraju

    tarunraju Moderator Moderator

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    Bullcrap! When the EU's trade commission ran anti-trust lawsuits against Microsoft demanding removal of Windows Media Player and Internet Explorer from copies of Windows 7 sold in the EU, Ballmer spearheaded lobbying against it, even at one point threatening to delay product launches, etc.

    Ballmer is just being a businessman. He want to sell Microsoft's piss-poor search engine (Bing) to China, even though that market is already saturated by Baidou / Google competition.
     
  7. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Well, you can't sell a search engine. It has to be used by the public on its own choice.

    I think Google is not only concerned with censoring here. They have played along for so long.

    MS has a point here. You need to follow the rules of the country you operate in. No one is exempt from that.

    Many countries have policies for filtering search results. That includes India, Germany etc.
     
  8. tarunraju

    tarunraju Moderator Moderator

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    Exactly, and Microsoft 'sells' it. There's tons of internet, print and televised ads of Bing out there.

    Google may be concerned that its valuable search algorithm and email service intellectual property is unsafe in China following attacks. They have a valid reason to feel that way. Google is what it is because of its search technology which nobody could beat.

    Which is exactly what Microsoft didn't do when the EU slapped them with antitrust lawsuits. So they have no moral right to take potshots at Google.

    Yes, but 'censorship' isn't the only thing that Google wants to quit China for. Censorship would mean that some 'Chinaman' (a government team or individuals) has to work 'closely' with Google, tell it exactly what to censor. Unlike India and Germany, China may be finding hundreds of sites to block each day. This would give that 'Chinaman' deeper access to the way Google works, which could then pave the way for Google's clones that actually work like it...that would hurt Google worldwide.
     
    Last edited: Jan 31, 2010
  9. mattster

    mattster Respected Member Senior Member

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    Thambi....you need to get your facts straight here. A site like Google has no credibility if it cant protect its users.

    The Chinese CCP scumbags planted employees in Google China to hack into the accounts of Chinese dissidents.
    I dont give a shit what the rules of the country are, but if you have employees of an international website spying on the email of users - then that is very serious for Google.

    Not only is that a loss of customer confidence to Google, but you also have to take into account that this is China.
    In China political dissidents may be executed with after a closed 10 minute trial. We are not talking India or USA or Sweden - this is China !!
    Obviously, when the stakes are so high - then it becomes about more than market share or money.
     
  10. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Agree. That is how the all search engines generate their revenue.

    I think that is not the main reason. The first article also suggests that Baidu may be the main reason they are quitting China. It is difficult to say for sure.

    Microsoft contested the rulings legally! It paid up the fines and complied with the rulings.

    They may be accused of monopolistic behaviour. Other companies (Oracle, Apple, IBM to name a few) indulge in much worse. MS only gets a bad name because they are so powerful.

    My understanding is that the Chinese government tells the search companies to block certain categories of websites. That includes pornography and political sites that they feel are subversive.

    Now, as I said, one may not agree with the policies, one can't disagree with the right of the Chinese government to enforce rules on any company that wants to operate in China.

    The IP theft has little to do with the decision I suspect.
     
    Last edited: Jan 31, 2010
  11. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Let's not mix issues here. China's political system may be bad. The issue here is whether Google left China because of that.
     
  12. Daredevil

    Daredevil On Vacation! Administrator

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    Vinod, the reason given by google, that is the trampling of free speech, censoring etc, is just to score a moral point while the real reason for quitting China, as mattster pointed out, is hacking into google gmail accounts and the source code by the google chinese employees. This is definitely a threat to google's IP and credibility among its consumers in the rest of the world. And so they decided to quit for greater good of its own company rather than for to champion free speech cause.

    Google would still be happy with its 33% market share in China if it is not for these attacks on its systems.
     
  13. amoy

    amoy Senior Member Senior Member

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    Don't see the point here how censorship leads to divulgence of Google's core 'valuable search algorithm'. Censorship is mainly about its content i.e. links to those prohibited sites such as porn, racial provocation, or 'political dissidents' etc..

    By the way Google's arch rival in China is Baidu, which is listed in Nasaq, registered in Cayman Islands, not a Chinese company either. Google is beyond a search engine... Gmail, Google Docs, Adsense, Adword... Its innovation is why it's not easily cloned and it's popular among Chinese.
     
  14. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Yes, that is what the initial reports suggested and it may be part of the reason. I don't think I have seen reports where Google has suspected Google China employees. The reports said that the company wanted to protect its employees in China.

    The hacking attempts were from other Chinese agencies as per the reports I have seen so far.
     
  15. tarunraju

    tarunraju Moderator Moderator

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    Nah, Baidu merely capitalized on the issue, being a competitor. It stepped into the drama in the middle of the controversy.

    No, that's a different case you're talking about (where they were fined some $500M) for being anti-competitive. Even in that case, MS was forced to pay up its fines, before which it had a little spat with EU. This was in case of bundling WMP and MSIE with the Windows 7 product, where it flatout refused to do initially (citing initially that such a thing "wasn't possible", later "time constraints", and other nonsense). Weeks before Windows 7's launch, it even gave out Release Candidate disc images which lacked WMP and MSIE, it was just days before launch that MS managed to 'convince' EU to release the proper version of its software. So MS has had its share of armtwisting with governments of not only other countries, but also its own.


    Yes, Google couldn't disagree, hence it decided to pull out. As Matt pointed out, it hits out at the company's credibility to secure information. If China could open up email accounts of its people, it can use the same mechanism to open up your account as well (assuming you have a Gmail account). That would kill Google's PR worldwide. That, and IP. The last time a western company such as Cisco got too cozy with China, it bred companies such as Huawei (many infringements of Cisco's IP):

    http://newsroom.cisco.com/dlls/corp_012303.html

    So Google has every reason to be weary before getting into bed with the Chinese government.
     
  16. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Baidu is a Chinese company. It has its headquarter in Beijing as far as I know. Owned by a Chinese and the first Chinese company to be included in NASDAQ-100 as per Wiki.

     
  17. Daredevil

    Daredevil On Vacation! Administrator

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    The hacking attempts allegedly had some inside help

    Google China Employees May Have Helped Chinese Government Hack Google
     
  18. mattster

    mattster Respected Member Senior Member

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    Again you are wrong. The UK newspaper the Telegraph reported that quite a few Google China employees were transfered and denied access to company servers.
    I posted a link to this article a while ago. Does this suprise anyone...that China would use Google insiders to spy on Chinese dissidents ??

    You also have to remember that Sergei Brin is of Russian origin and that affects his view of this type of stuff.
     
  19. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    I am not sure of Baidu's role in the whole thing. Not seen any reports so far.

    They would obviously be benefited by this. They are trying to enter Japan and want to become the number 1 in the search business worldwide. They may well do that if Google really exits China.

    Well, I do see a difference in the two cases. MS never said it will not comply with the rules of a government. It tried to use the system to its ends. In the best capitalist traditions. ;)

    Yes, IP is a concern for every company operating in China. I am personally not convinced now that this was the main issue for Google leaving China.
     
  20. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Thanks for this info. I must have missed this.
     
  21. amoy

    amoy Senior Member Senior Member

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    Those headquartered in Beijing are Baidu's subsidiaries Baidu Netcom Science and Baidu Online Network Technology, Baidu's founders are Chinese Americans. And Baidu 's parent company Baidu Holding was registered in British Virgin Islands, listed in Nasdaq.

    Baidu's top shareholder is DFJ ePlanet based in the US, then Integrity Partners. Google was even a shareholder in Baidu too (2.6% prior to IPO).

    Just to point out clone of Google in China is a joke. But Baidu shall be a beneficiary certainly should Google exit.
     

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