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Google Threatens to Pull out of China, Citing Censorship and Cyberhacking

Posted by Daniel Shain

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Recently, Google made a very bold and very public threat that they would pull out of China due to concerns over increased censorship and sophisticated hacker attacks that they have traced to China. If it happens, it will come as a shock to business analysts everywhere, since China is the #1 growing market for something Google covets - internet users.

There has always been friction both within and outside of Google concerning their operations there. Before building a complex there and establishing Google.cn, Google had to consent to a certain degree of self-censorship in order to be approved by the government, an idea they were never comfortable with. Neither were many Google-philes who saw this as a violation of Google's "don't be evil" mantra. But Google saw an opportunity to bring its services to hundreds of millions of users, so they jumped on board, figuring an imperfect Google is better than no Google, and gained coveted world market share in the process.

That was 2006, and it seems it has taken just under 4 years for the weight of censorship and a meddling Chinese government to break Google's back. Google has claimed it will no longer filter its search results, and while it will talk to the Chinese government to see if they can still operate in China without filtration, they fully recognize that they might not be able to. This move comes immediately after revelations that Google uncovered a sophisticated series of cyberattacks on Google as well as other companies, with the apparent aim of tracking down Chinese human rights activists. Google says that 2 Gmail accounts were actually hacked, but they discovered that many more were being routinely accessed as a result of malware of phishing scams. Google says one of the reasons they are sharing this information is to alert people of potential breaches. You may have noticed a "More Gmail Security" link on the top of your Gmail pages - the resultant option to always connect via https and other internal security buffs come as a direct result of these attacks.

There are a lot of people who will wonder why Google, a company that has worked hard to establish "good guy" credibility, didn't even get out sooner. They might shake their heads and wonder if the reason was truly the previously estimated 600M Google stood to make in China during 2010 rather than Google's "some improvement is better than us not being there at all" ideology. This would fly in the face of Chinese media, and most particularly Google's rival search engine in China Baidu, who say Google is either pulling a stunt or leaving for financial reasons. It is true that Google, which operates at about a 67% clip both in the US and globally, has never come close to that kind of dominance in China, where it's market share is more like 30%. But while Google would love to be larger, is 30% really a reason to leave? For reference, Yahoo! and Bing combined in the US add up to about 27% of market share.

If Google does leave, many worry about conditions in China. While Google was censored and a clear second fiddle, it presented the only notable competition to the more government friendly Baidu, and a lack of competition generally amounts to a lack of innovation and inferior products for consumers (just look at Microsoft circa 2000). It would also be a tough pill for Google to swallow, that there are just going to be 300M (and growing fast) internet users who will have little if any access to Google.

As for China, they have hardly seemed to care, at least as far as official channels go. It seems they are fine with Google leaving and Baidu handling things.

Maybe it's my post-Cold-War upbringing, but whenever I hear things like this I always think, come on, just because they're communists doesn't mean they're as evil as all that, does it? And at the same time I take a cynical view to corporations like Google - could they really be so altruistic as to throw away 600M over ethical concerns? If everything I've read is actually true then the answers to these questions are yes and yes though. Anybody else got an opinion?

Further reading for you - Googleblog: Google goes into China / leaves China

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