It's not exactly news that the relationship between Google and China has soured over the last month or two and it looks as though Google may quit China soon leaving the vastly lucrative Chinese market to Microsoft and others. What's not clear is what the implications will be for the search giant which has found itself caught up in the political machinations of a repressive Chinese government. The story sounds like the start of a John le Carre novel, but the fact is it's very real and the stakes very high.
Chinese Fire First Volley
It all started a couple of months ago when Google discovered a major attack against its networks that had originated inside of China with the goal of hijaaking the Gmail accounts of Chinese Human Rights Activists. (Little did the Chinese spies know they could have just waited a month until the release of Buzz and gotten those addresses much easier.) Google's chief legal officer, David Drummond wrote a lengthy blog post on the official Google Blog on the matter shortly after the story broke, and was less than amused by the incident. It was clear at that moment the situation and the relationship was deteriorating rapidly. Since that day, Google has continued to negotiate with the government, but recent reports suggest these talks are going nowhere and the end could be coming soon.
Everyone Knows China's Huge
comScore's 2009 search engine report card shows that worldwide last year China was second only to the US with more than 13 billion searches. That number is only likely to increase in coming years as China continues to modernize. Billions of searches more than likely translates into big bucks, and it probably explains why that when Google first launched in China back in 2006, it was willing to hold its corporate nose and accept some censorship of its results as the cost of doing business there, but Google has learned the hard way the price is even higher than it first appeared.
All that said, as I reported here last September here on DaniWeb, Google is actually a distant second in China in the search engine game. A company called Baidu controls 65 percent of Chinese searches. That's enough to land it third on comScore's list of top search engines for 2009, well ahead of Microsoft, the fourth place finisher.
Is This Really the End?
Perhaps Google has looked at the landscape in China and seen that after more than 3 years there, the Chinese prefer native Chinese language search engines. Maybe it has decided that even a small percentage of the Chinese market is not worth the hassle of dealing with the Chinese government on a regular basis.
But given the numbers involved in China, there has to be a lot of mixed feelings in Google's corporate office these days. For, although they may come off as corporate crusaders willing to take on demagogues over profits, the fact is as a publicly traded company, this can't be an easy decision.
So they may walk away today and cede their percentage of the Chinese search market to Microsoft and others, but my guess is that after an appropriate amount of time, they will go back to the table and eventually find a satisfactory resolution. The stakes are simply too high not to.