Last week on Google’s Q4 earnings call Google CEO Eric Schmidt seemed to “walk back” some of Google’s prior strong statements about leaving China if it cannot operate in an unfiltered way there. In response to a financial analyst question he said the following:
We have made a strong statement we wish to remain in China. We like the Chinese people. We like our Chinese employees. We like the business opportunities there and we would like to do that on somewhat different terms than we have. But we remain quite committed to being there.
Several of Google’s Android/Open Handset Alliance partners, including Lenovo and Motorola, have said they will press on with their plans to launch Chinese Android handsets regardless of what Google does (or doesn’t do) in the country.
The Associated Press is now reporting that Google will likely find a way to have a presence in China, either by maintaining its research center, its ad sales group or both:
Google Inc. is in delicate negotiations with the Chinese government to keep its research center in China, an advertising sales team that generates most of the company’s revenue in the country and a fledgling mobile phone business . . .
The Chinese sales force is important to Google because most of the company’s revenue in China comes from online ads sold on Google’s U.S. Web site, Google.com. The company also runs an ad network that places marketing messages on other China-based Web sites besides its own.
Analysts say keeping Chinese advertisers happy would be more difficult if Google closes its sales office in the country and tries to connect with the customers from abroad. Alienated advertisers would be more likely to defect to alternatives still based in China, such as Baidu Inc. and Alibaba Group, which is part owned by Yahoo Inc.
In its public statements and private negotiations Google is walking a fine line, trying to maintain a Chinese presence but not appear to renege on its pledge to no longer censor search results on Google.cn.
For its part the Chinese government has denied any involvement in the attacks on Google’s Chinese operations and publicly given no ground regarding its willingness to allow Google to provide an uncensored search engine in the country.