January 14,2010

Should Baidu Giggle at Google's Possible Withdrawal?

By CSC staff, Shanghai

Google announced on its official blog yesterday that if it can not achieve agreements with the Chinese government concerning intellectual property rights within the legal framework in the next few weeks, it will close its operations in

China, as well as its Google.cn site.

 

There is speculation that Google's threat is a psychological ploy, aimed at a new round of business negotiations with the Chinese Government on search engines. The issue reflects a looming conflict between Google headquarters and Google China.

 

A rumor late last year had it that of Google China's music search business would be terminated, which proved to be hearsay but not entirely groundless. Word is that Google headquarters is dissatisfied with a series of localization policies carried out by Li Kaifu, Google China's founding president. Despite Li's high-profile departure in September to start his own business, his influence on Google China will long be felt.

 

Google's entry into China has met with repeated perils and obstacles. Its DNS has been hijacked and its service has been blocked several times. In addition, a series of problems with licensing and tax evasion charges have hampered its quest for market share. After the establishing of Google.cn, a series of policies promoted by Li Kaifu did not succeed in successfully challenging its main competitor Baidu. The latest survey results show that, outside first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, Google's market share is below 20%, incompatible with its status as the world's largest Internet giant.

 

Insiders estimate that if Google withdraws from the Chinese market, more than 50,000 people engaged in Google ads and search engine optimization will lose their jobs, more than 200,000 individual owners will lose their network channels to make money, the promotion of more than 1 million corporate networks will be influenced, and more than 100 million internet users will lose a major search engine.

 

Google seems to have made its decision. Its position on withdrawal from China has completely bypassed Google China. It may well be its true intention to withdraw from the disputed land of the Chinese Internet.

 

A series of Internet measures by the Chinese government, including the barring of any content in its search results deemed to violate Chinese law, have caused Google China to make compromises that clearly violate the principles Google has publicly adhered to. That and its unsuccessful drive for market share may make giving up Google China less a disaster than it might seem.

 

Google's 2008 annual revenues in China are estimated at $210 million, against Baidu's of $468.8 million, while Google's global revenues totaled $21.8 billion, so Google China's revenue was less than 1% of Google's total. Withdrawal from China will have little impact on the company.

 

China's Internet users hope the Chinese government will negotiate earnestly with Google on both sides' concerns. The world's best Internet services, such as YouTube, Facebook, Twitter, Blogger, WordPress, and Google, are leaving China one by one, a growing problem in a world that is otherwise becoming increasingly connected. Baidu CEO Robin Li has said that it is difficult to see where Google will be in five years time. He must be aware that, despite the withdrawal of his greatest competitor, Google's withdrawal from China may be a harbinger of troubles for Baidu.

 

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