Google’s China Gambit: Day Two Reaction

Google’s decision to potentially pull out of China if it cannot operate without censorship is a remarkable story. The statement was made after Google discovered a “highly sophisticated and targeted attack” on GMail. Google didn’t say the Chinese government was behind the attacks but that’s the clear implication. The attacks involved more than just Google apparently. Adobe has publicly confirmed it was similarly attacked.

Google’s public statements and decision are being applauded, dissected and heavily tweeted within and outside China. Discussion of the decision dominates Techmeme, and is a top story across the world on news websites. Google has said that it “may” leave if it cannot come to terms with the Chinese government and operate “an unfiltered search engine within the law.”

There’s no reason to expect the Chinese government, which perpetrated the Tiananmen Square massacre (results for which Google cannot show in China), will capitulate and allow Google to operate freely there. Thus Google will likely be compelled to exit the largest internet market in the world.

It’s an amazing turn of events and may signal the beginning of a kind of “cyber Cold War” between China and the West. Hopefully not. After the initial surprise, and in some quarters elation, there are a wide variety of reactions and responses emerging. Here is a sampling:

US Secretary of State Hillary Clinton:

We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation. The ability to operate with confidence in cyberspace is critical in a modern society and economy. I will be giving an address next week on the centrality of internet freedom in the 21st century, and we will have further comment on this matter as the facts become clear.

China watcher Rebecca MacKinnon

Google’s decision was tough and is going to have a great deal of of difficult fallout. Still, based on what I know, I think Google has done the right thing. They are sending a very public message – which people in China are hearing – that the Chinese government’s approach to Internet regulation is unacceptable and poisonous. They are living up to their “don’t be evil” motto – much mocked of late – and living up to their commitments to free speech and privacy as a member of the Global Network Initiative.

Journalist and China expert James Fallows:

In terms of the next stage of China’s emergence as a power and dealings with the United States, this event has the potential to make a great deal of difference — in a negative way, for China. I think of this as the beginning of China’s Bush-Cheney era.

Electronic Frontier Foundation:

When Google first launched a filtered search engine in China, EFF was one of the first to criticize it; we’d now like to be one of the first to commend Google for its brave and forthright declaration to provide only an uncensored Chinese language version of its search engine.

Our hope is that other tech companies will follow Google’s lead. Too many of them have been willing to comply with Chinese demands that they check their values at the border.

And some cynicism from PaidContent and ZDNET:

There may be a regulatory payoff. Let’s face it: Google needs a lot of government approval on many fronts. Google has to worry about antitrust regulators meddling in little purchases such as the search giant’s acquisition of AdMob. European Union watchdogs are increasingly eyeing Google. Taking a hard line against China can win over a lot of fans in Washington D.C. It’s hard not to like a company taking a stand against China—especially since the U.S. government can’t right now (China is our banker).

Google’s threat to leave China may be a bluff. Google made waves, but left a door open to discussion with the Chinese government. It’s possible that both sides want some sort of agreement. After all, we’re talking business and money here.

Big cynicism from TechCrunch:

Does anyone really think Google would be doing this if it had top market share in the country? For one thing, I’d guess that would open them up to shareholder lawsuits. Google is a for-profit, publicly-held company at the end of the day. When I met with Google’s former head of China Kai-fu Lee in Beijing last October, he noted that one reason he left Google was that it was clear the company was never going to substantially increase its market share or beat Baidu. Google has clearly decided doing business in China isn’t worth it, and are turning what would be a negative into a marketing positive for its business in the rest of the world.

For its part the Chinese government says that it’s seeking information on “Google’s intentions.”

Citigroup’s Mark Mahaney estimates that Google’s Chinese revenues in 2010 would be roughly $300-$350 million (vs. Baidu $900 million) and that withdrawal from the market would put at risk “1% of its 2010 profit.”

Postscript From Danny Sullivan: At the end of my story yesterday, I addressed some of the cynicism — which is fair to raise, but which I don’t believe to be the case. In part:

Google is an engineering culture. The engineer rules over everything. And for these engineers, their creations are like children.

The Chinese hacking attacks that Google alleges are like an attack on those children. It’s a line that I think Google simply would not allow to be crossed. I think Google is reacting in the harsh way it did today because it feels like a mother who just watched some bully pick on their child. She’s going to pull the child close and say to the attacker, “Only over my dead body. Do what you want to me. You leave my child alone.”

And that’s what Google did today. Sure, Google says it hopes that it can find a solution with the Chinese government. But ultimately, it has had enough and simply doesn’t give a damn. It’s also a big enough company with plenty of revenue from other sources to be able to walk away — not to mention that it is ultimately controlled by two founders with a stock structure that means they can ignore whatever the markets might think, if they really want.