Google's bold threat to pull out of China has put a spotlight on something many in the tech sector have long groused about: China has been able to wedge its way into the hottest tech services by bending ground rules in its favor.Google, Microsoft, Yahoo, Facebook, Twitterand other companies covet a foothold in China's massive consumer market of 1.3 billion tech-hungry citizens.
But China recognizes the growth potential of its home market, as well. It launched the state-controlled Baidu search service in 2000, which now controls 62% of the China search market, according to researcher ComScore. And the government keeps close tabs on popular social networks such as Qzone, a huge hit with teenagers, and Zhanzuo, popular with college students.
Meanwhile, China has hamstrung efforts by Google, Microsoft and Yahoo to introduce versions of their respective search services to Chinese consumers. Each has had to agree to censor content at the behest of the Chinese government. And from time to time, most Western companies operating in China have been hit with unexpected, unexplained service disruptions.
Last June, for instance, just as Microsoft was rolling out the latest iteration of its search engine — Bing — disruptions hit Bing, Google, Yahoo Search, Twitter and Facebook. This occurred in conjunction with government attempts to keep unapproved media coverage of the 20th anniversary of the Tiananmen Square massacre from reaching the wider citizenry.
Such hassles highlight "the additional risks to all businesses, particularly Internet businesses, who are investing in China," says Kevin Lee, CEO of search consultants Didit. "The Chinese government isn't beyond playing hardball for either business reasons or philosophical reasons."
Wenqi Gao, spokesman for the Chinese consulate in New York, told The New York Times that China is committed to protecting the rights of foreign companies operating in China.
On Tuesday, Google played hardball right back. Citing irritation over cyberattacks, the search giant said it will no longer adhere to censorship rules and may pull out of China.
It's extremely rare for a corporate entity to try to publicly shame China into lightening up on censorship.
"Google's dead in China," predicts Shaun Rein, managing director of China Market Research Group, a research and consulting firm in Shanghai. Even if the company were to stay on, no one in China "would have the confidence to do marketing campaigns" with them.
Google was starting to reap small dividends in China, after opening a beachhead office in Beijing in 2006. Gene Munster, tech industry analyst at Piper Jaffray, estimates Google's Beijing operations generate about $400 million a year — a fraction of its $22 billion in 2008 revenue.
Danny Sullivan, editor of the Search Engine Land blog, says Google may have gotten fed up with censorship, compounded by presumedly state-sponsored probes of its Gmail databases.
Google does obey censorship rules in other countries and may be trying to drive toward less-rigid policies in China, says Sullivan. For instance, Google might readily agree to censor child porn if China agreed to keep its censors away from search results having to do with political discourse, says Sullivan.
But Duncan Clark, chairman at BDA China, a Beijing-based consulting firm, says there are few scenarios he could envision "where Google will win" and China will back down.
"China is not going to make concessions in a public fashion like this," Duncan says.
David Bandurski, a researcher at the University of Hong Kong's China Media Project, agrees there is little chance China will alter its censorship policies and practices.
"The Chinese state regards censorship, or 'guidance of public opinion,' as essential to maintaining social and political stability," says Bandurski.
