Donnie's Blog

Google’s exit from China has caused major waves in not just the technology circles, but even in living rooms and water-cooler discussions everywhere. This is for good reason, as both China and Google are super-heavy-weights, and major movers-and-shakers.

Any decisions they make impact the lives of millions, if not billions of people worldwide, and so it’s not surprising that there is so much discussion over their threats to pull out of China over what appears to be an attempt by the Chinese government to hack into Google’s infrastructure. This was purportedly to hack into the Gmail accounts of Chinese human rights activists (at least two attempts were partially successful).

While there isn’t exactly a wealth of evidence confirming the role of the Chinese government in these attacks, China’s extremely poor track record when it comes to human rights, and their readiness to aggressively target ‘unfriendlies’ suggests this is quite feasible. Further, Google would not have blamed the Chinese government were it not extremely sure that they were responsible. Remember – while they haven’t named the Chinese government, their actions and response have clearly shown they believe the government to be responsible.

Much has been said about Google’s possible motivations, which mainly fell into the main categories of:

• A corporate decision, stemming from their failure to make a significant foothold into the Chinese market, or because there was a great threat to their proprietary property (code, data)
• An ethical decision, possibly fueled by co-founder Sergey Brin’s ideals and an internal belief in their slogan ‘do no evil’

There is also a lot of criticism leveled against Google, since it was widely believed that entering the Chinese market at the cost of censoring results according to the Chinese government wishes was a sell-out.

Personally, I believe that this was a laudable and extremely courageous move by Google. I was one of those who was disappointed by Google’s cop-outs when they agreed to censor their search results for China. While I didn’t think that it made Google ‘evil’ (as many believed), I did felt that they had diluted their core ethics and principles. Google did claim that by allowing the Chinese people greater access to information, they were doing more good than harm, and arguably this was true.

In any case, I certainly do not believe that Google’s present move was because of purely corporate reasons – though my first reaction was that an attack on their proprietary code would be the biggest blow to Google in its short history. The first stated reason: that Google was pulling out because it failed to gain a foothold into the Chinese market, and was using this attack as an excuse is ludicrous. Google has a 21% share in the Chinese market, and is second only to the Baidu search engine. It’s revenues were ‘only’ somewhere between 300-600 million dollars. That is by no means a failure, even if Google wasn’t turning a profit (which I doubt). Google is known for its long term strategies – it often adopts long-term strategies, at the cost of immediate profits. Tons of examples abound, including the open source Chrome, Chrome OS, Android, Google Voice service, Gmail, et al. At present, it has only one primary source of revenue – Google AdSense, and a portion of this is exactly what it is sacrificing when pulling out of China.

It makes no sense to me that a company would leave the world’s most promising, most lucrative market because it failed to utterly dominate it! Since when is a 21% market share, and revenues in the 100s of millions of dollars a bad thing?! Remember that Google also does not lead in a number of other countries, including Japan and South Korea, where Yahoo and Naver respectively lead.

Also, just because Google hasn’t been able to dominate yet wouldn’t mean that a pull-out was the answer. Far from it. Google has the cash, the resources and the time  - the Chinese market will only expand in the coming years, meaning that 21% will grow to many millions of users more.

Further, the search engine market share is only one of Google’s main concerns in China – it also depends upon a highly trained Chinese workforce (which develops solutions for Google’s global offerings). Google also stands to lose millions of sales of its Android powered handsets – which Google believes will be one of its core offerings and revenue generators in the coming years. China has been a lucrative market for Android handsets, and Google will definitely take a hit in Android sales if it pulls out of China. Staying in the Chinese market is critical to these concerns.

The second stated possibility, that Google was worried about its proprietary data and code holds more water, it would appear. Google search is one of the only products that Google has said it will not open up the source code for, and with good reason. Also, compromising the data of user searches, IP addresses, emails, etc., would be devastating for Google – even if only the business perspective was considered.

However, I don’t think this would have warranted a Google exit, and such a public denouncement of the Chinese government’s attacks (though it did not name them, it was clear a finger was being pointed at the Chinese government). The reaction would have been different – maybe a press release, followed by some massive restructuring of its Chinese operations.

What happened, however, seems to be more of a ‘scorched earth’ exit policy, as has been widely reported. Google has quite decisively severed ties with the Chinese government, to the point of possibly losing out on ALL its revenue sources – present and future in the market. That does not to me, sound like a purely security-oriented reaction. It is quite clearly, a political decision, and one that could only come from the topmost echelons of Google. Without being able to back it up with any proof, I suspect that this was a decision that occupied the hearts and minds of the co-founders for mostly ethical reasons.

I am not saying that there was no business rationale behind it – that would be naivety. However, I think the driver was not business, but ethical. Google as I  have mentioned, has been known to take a long term approach to decisions, and in their minds, this might be the most sensible business decision in the long term.

We will have to wait and see how this plays out, and whether Google’s gamble is successful in the long run. I, for one, applaud Google, and hope that this is a decisive moment, that shapes history beyond just a business perspective. I would love to see more wide-spread support for Google, possibly with more companies revolting against China’s government’s dictatorial shackles. I would hope the Chinese public offers support for Google as well, and forces a gradual and lasting change in the government’s policies and outlooks. After all, very few want a future with China as a bully forcing companies and people to bend to its wills to do evil. China would do well to changes its ways and adopt Google’s mantra as its own, and do no evil.