Even though Google’s rate of growth outside the US and UK exceeds the US by some 20%, it still seems significantly behind both the Chinese performance of Baidu at 85% growth over the same quarter in 2010 or Yandex’s 65% growth over the same period.

Of course, both Baidu and Yandex are helped by their market leading postions in growing economies. The IMF is forecasting 9.4% growth for China in 2011 and 4.2% for Russia. By comparison, the UK’s growth rate is expected to be 1.1% and the US a rattling 1.5%.

Google Baidu and Yandex Compared Financially

The chart above shows the relative revenues of Google versus Baidu and versus Yandex which gives us a great perspective on what we’re talking about. Although Google growth is less than the other two engines in percentage terms, in real dollars, it’s actually a much much bigger number.

Strong Growth Markets Help Baidu & Yandex

Additionally, looking at percentages is a little misleading when we consider that many of the economies where Google is successful, such as in western Europe, have very high penetrations of Google use and the scope for growth is much more limited.

Both Yandex and Baidu have all their operations in countries where Internet penetration is relatively low giving them great scope for advancement.

Google Baidu and Yandex Compared In Revenues As a Percentage Of The Total

This second graphic above seems to suggest that Google is losing market share internationally. There is a grain of truth in drawing that conclusion – but it is a relatively small “grain”.

Firstly, Yandex only become a publicly quoted company this year giving us much more insight into the statistics relating to its performance and enabling us to include its figures on this chart.

However, what it does suggest is that Google is missing out on two key markets where the search engine market is growing rapidly meaning that both Yandex and Baidu are increasing their share of the global market — at least in dollar terms.

Stellar Performance From Baidu With Room To Grow

Baidu CEO Robin Li described the results as “stellar”. He also highlighted the fact that China’s search industry is still in its early stages and that Baidu has “Enormous room for continuing growth as users and online marketing customers become increasingly sophisticated.”

Mr. Li also pointed to three factors which had helped Baidu along in this quarter namely traffic growth, improved monetization from the Pheonix platform which drives the contextual ads and greater uptake of search advertising by large corporate advertisers.

The use of more sophisticated keyword matching for Pheonix Nest through something called “Advanced [quick] match” has been particularly successful at capturing user intent and generating strong click through rates.

Personalized Search Lands On Baidu’s Homepage

Robin Li has expressed particular satisfaction at the launch of the Baidu personalized homepage, which is not personalized search as we know it — but automated changes to the content shown on the initial homepage before the user even begins to search. This is based on search history, of course, and if a user has a history of searching for movies, for instance, then they will likely see a link on the homepage to local cinema times.

Turning to mobile, ironically, Baidu is now also the default search engine on over 80% of branded handsets in China that use the Android system — which just goes to show that Android dominance hasn’t so far been leading to greater search query shares for Google.

Yandex Says Hello To Turkey

For Yandex, this is only the second quarter where we have detailed financial information but CEO Arkady Volozh highlighted the market benefit, “While our markets are fluid and competitive by nature, they are large and are growing rapidly.” Yandex also made the first major investment in a new market with their launch in Turkey which will have had very little impact on the quarter’s figures.

Panguso faces more than censorship challenges, as it confronts Baidu’s whopping 76% market share in China, according to Analysys International, a Beijing-based market research firm. This is especially true given that once-popular Google has slipped beneath 20% market share now that its servers are no longer located in China.

Li is set to speak at 5:15pm Pacific, and he’ll be interviewed on stage by John Battelle. Live blogging to start shortly. There’s also a live stream here.

Don’t know much about Baidu? China’s largest search engine. BusinessWeek just did a big profile about it, which you can read here or get the highlights from our How Google Could Have Bought Baidu And Other Fascinating Details About China’s Largest Search Engine post.

John: Baidu is largest search company and portal in China, welcomes Robin on. Says it’s his first talk at an industry conference in the US. Mentions Eric Schmidt’s comment in the BusinessWeek profile as a great gift to Baidu.

Robin: 5 years ago, people asked him what would you do to win China. Said he would stay 6 months to a year in China. Eric didn’t take his advice.

John: Your stock is double since January, market cap is pushing $40 billion.

Robin: Puts up roughtly to eBay.

John: Do you feel pressure to continue that rocketship ride?

Robin: When I founded this company 10 years ago, I never knew that search could be so profitable. I really liked to search and thought search could be useful. Used by 100s of millions of people, and I knew I could achieve that. Now, I don’t need more money, but I need to make our product better. That’s the driver behind my daily work. Not the stock price. Maybe some know 5 years ago when public, the Baidu price was $27 and closed at $22 (I think). That was more pressure. The stock has been up or down every year. I’m used to that. What’s important that the users keep growing, other things keep growing. We have plenty of room for growth. In US took about 10 years for internet market to mature. In China, started at roughly same time in 1995, but internet penetration is only about 1/3.

John: But that’s like 400 million people. How big can it get?

Robin: Lots of mobile phones, thinks can get to 800 million (think he said).

John: How many use Baidu?

Robin: about 99%. We have a lot of coverge (laughs from the audience). Answer more queries than any other search engine in their market.

John: Including Google in the US.

Robin: Yes [me: worldwide, Google reported by comScore last year as handling still far more than Baidu worldwide, I'll try to drop a link later).

John: Google got the sense with hacking and govt interference they weren't on a level playing field and China was a favored son.

Robin: That's a common misperceptions. People think there are no choices and Baidu is favored. But the reality is there are more choices in the US than in China. Here you have Google and Bing and what's the number three? In China, named one (didn't catch), and there's Sodu and there are a couple more. Many other Chinese companies are doing web search and places from outside China are offering it.

John: Why else do you think Google wasn't successful in China?

Robin: China is a very different market. It's a large and growing, meaning the market condidtions change every day, and you have to be close to it. Second, lots of VC money, lots of Silicon Valley VCs poured money into it. Third reason is that there are a lot of Chinese engineers here in the US that are very well trained, many of them are willing to go back to China and start their own company or join an existing one. If you're not prepared to compete in this type of market, you're not going to be successful. With Baidu, I think we did try harder. When I moved back to Beijing 10 years ago, I gave up all my stock options here (he was an Infoseek engineer).

John: You wrote a PageRank like algorithm before?

Robin: Before hired, Infoseek liked his research. Had the first patent on it in the US he believes. But he gave all that and focused on Chinese search. We were close to the market, came up with a lot of innovative ideas. For example in 2003, before Web 2.0 idea was coined, they started adding user generated content into their results. A query based online community, they have a bar or message board system where you can ask question, answer those from others or make comments. In early days, there wasn't enough Chinese information online. So we made this product [kind of like how YouTube created video content that in turn helped power a video search revolution]. Chinese users have already answerd 100 million questions on the system. We added a lot of social community so our users feel they really belong here. It’s very hard for them to leave.

John: So do you have Holy Grail of social and search that Google and Facebook seem to be looking at?

Robin: [Sorry, didn't catch first part]. System is designed to make people feel they belong, introduces high switching costs.

John: Would it make sense to have Facebook Connect in Baidu?

Robin: We don’t have a full blown social graph yet. But happy to add that.

John: Mark Zuckerberg will be here tomorrow, so I’m sure you’ll be happy to talk he jokes.

You’ve worked in both markets, what is it like to build a company with an entrepeneurial culture in China, with a very different environment and government. What can we learn?

Robin: China is an emerging market, not everything is developed, so you have to be patient. In US, company can be set up in 1 day, in China, it can take 20. He said it’s OK, hired a consultant, got office space while waiting for license. It doens’t hurt so much, as long as you keep open minded and control what you can. You can’t control censorship or slow internet connections.

John: There’s a perception in the US here that there’s no censorship versus China, that you search the whole web. Is that a frustration for you, along with low bandwidth.

Robin: My first reaction was also let’s move to Hong Kong (over censorship issue, when he first started). But I realized that wouldn’t work. If I were to move to Hong Kong, they’d call me some type of anti-government company, and my life would be ruined. If an American company moves, they’ll still call them “strategic partners.”

John: Found it interesting that the Chinese govt announced it might start a search engine, since Baidu has so much share.

Robin: It’s not a new thing. It’s OK. Providing more choices to the Chinese users is not a bad thing, but we are allowed to compete.

John: It would be unthinkable for the US to do such a thing.

Robin: China has a very strong govt.

John: I think you made an understatement.

Robin: I’m not worried.

John: Let’s talk about mobile. How is that developing in China, and if you ran a mobile app start up, what would be the things you should know.

Robin: There are about 800 million mobile phones but large portion of them aren’t internet enabled, maybe 150 million. But there’s a catch. Most of them use 2G phones to go on the internet, which means it’s slow and expensive, carriers charge by number of bytes. Most high-end people who use them don’t care about the cost. Vast majority of Chinese people are low income, can’t afford a PC, nannies or migrant workers, at night they lie back and go on the internet. It’ll change as the mobile network grows, user behavior will grow, and product will change, but we don’t know yet what the killer app will be. The status is not really stable. We don’t even know what the most poular device to go online.

John: Could Baidu provide it, like Google does with Android.

Robin: Our box idea is that something that boots up within one second and you get a box that lets you do whatever you want to do. It replaces the operating system. you can search, find apps, publish your tweets. The box is intelligent enough to understand.

John: How do you execute that vision?

Robin: One key part is to understand intention. People put all types of queries into their search box, so they know for certain user needs, like weather, there are probably 200 different needs to express the same meaning. So we can better understand intention, and once we have it, it’s easier to deliver it.

John: Lots of entrepeneurs here. One of the great stories is the moment when offered an ungodly amount of money to sell their company and they say no. That narrative is mythic in the valley. That’s happened to you a number of times. $1.5 to 2 billion offered by Google, Yahoo and Microsoft. Why say no?

Robin: Because I knew Baid u had more potential than 1-2 billion. At that time, China’s market was still knew. In 5 years, revs gone up 30 times. Don’t think Google Yahoo Microsoft knew that.

Q&A Time: Why doesn’t India have its own Baidu?

Robin: Most of India speaks English, writes in English, so Google already solved the problem. For China, it was very different. When I went back, people used to wait for 5 seconds to get answer. No space for words in Chinese language, you have to parse it differently. We had to help users create content and the speed of information growth was very high. In the first 3-5 year, we basically tripled our index size. Search engines here think overall growth 30-50 percent, then I’ll grow my index by that, and it’ll be good enough. But in China, we were able to keep up with the growth.

Question: What can the US learn from China?

Robin: Most of the ideas China learned from the US and its early start. But in recent years, there are innovations coming out for search, because we have the largest market. The addition of social layer makes search sticky and hard to switch. For social, Chinese company called 10 cents [I think] with hundreds of millions of users, started with instant messaging and added much to their platform. These kind of things, maybe US can pay more attention. Going forward, you should pay more attention to that market [the Chinese market] because it’s so large, and they’ll encounter new problems, and you’ll start to innovate.

John: Are you coming to the US?

Robin: We do have ambitions to expand outside of China. Been in Japan for two years. But US is probably not a high priority because it’s a large and mature market. We’d have to thnk carefully about it.

And that’s it.

Those quotes and several statistics showing the potential impact of a Google-less China on the country’s scientists are detailed in a new Nature magazine article, A land without Google?

Nature surveyed 784 Chinese scientists and 84% said that losing Google would “somewhat or significantly” hamper their research; 78% said that international collaborations would be impacted in the same way. Other revealing stats from the survey include:

• more than 75% of Chinese scientists use Google as their primary search engine for scientific research
• more than 80% use Google to find academic papers
• about 60% use Google to learn about scientific discoveries or the research of other scientists
• only 17% use Baidu as their primary search engine

Google’s future in China has been in doubt since January 12, when the company said it planned to stop censoring its results on Google.cn as required by Chinese law. Discussions between Google and China are reported to be continuing, but no decisions have been made.

The Nature article suggests that, while Google.cn doesn’t necessarily offer a better search algorithm than Baidu for Chinese-language content, it’s necessary for researching English-language material outside of China.

The full survey, in PDF format, can be downloaded here.

“They’ve done nothing and gotten a lot of credit for it,” Gates said Monday during a visit at The New York Times.

“What point are they making?” Mr. Gates asked. “Now, if Google ever chooses to pull out of the United States, then I’d give them credit.”

Gates’ comments come just days after current Microsoft CEO Steve Ballmer was also critical of Google’s stance. Both Gates and Ballmer pointed out that many countries have questionable laws and policies.

Lest Sergey Brin and Larry Page are losing sleep over these verbal jabs, let’s point out that Gates also defended Google when asked if he considered them a monopoly: “I wouldn’t call anyone a monopolist.”

Ballmer suggested that Google’s decision to no longer filter out internet searches objectionable to the Chinese government was an irrational business decision. After all, Ballmer said, the U.S. imports oil from Saudi Arabia despite the censorship that goes on in that country.

“The U.S. is the most extreme when it comes to free speech,” said Ballmer, noting however that even the U.S. bans child pornography, while France bans internet access to Nazi imagery.

Forbes says Ballmer made the statements during the Q&A session after a speech to oil company executives. Ballmer also said that Bing will comply with requests to censor its search results “if the Chinese government gives us proper legal notice.”

Here is a picture of the ad:

Google, on occasion, will buy search ads to explain why the search results are a certain way. Here, they are explaining why Google China is no longer censored, but previously they have purchased ads for why an offensive image of Michelle Obama appeared on Google Images. They have also purchased ads for explaining why certain anti-semitic pages rank for the keyword [jew].

Which reminds me, I posted this morning at the Search Engine Roundtable how the 1st image for Jesus in Google has a picture of Jesus smoking a cigarette and drinking a can of beer. I wonder if Google will show an explanation for that image result as well in the near future.

Google has revealed that the Gmail accounts of Chinese human rights activists were targeted last December in a hacking attempt. That, along with other issues, has convinced the company that it will no longer censor results China as the Chinese government wishes.

In particular, Google has willingly allowed self-censored its search results since January 27, 2006, on its Google China service. The screenshot above show an example of this, where a search for tiananmen on Google China (on the left) doesn’t bring up protest pictures as you get when searching for the same thing on Google’s main site at Google.com.

Google was heavily criticized for caving into China, especially in light of its “Don’t Be Evil” motto. Google CEO Eric Schmidt at one point explained that Google developed an evil scale to weigh if it was better to be a little evil in censoring for the bigger good in bringing information to the Chinese people.

That scale has now tipped so much that Google’s effectively pulling out entirely of censorship. As it has investigated attacks on its Gmail service, Google has decided cooperating on censorship makes no sense. I’ve bolded the key part from today’s blog post:

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.

What was the attack that triggered all this? Google says that in mid-December, it detected an attack from China on its “corporate infrastructure” that resulted in the theft of “intellectual property” from Google. Exactly what intellectual property was stolen wasn’t disclosed, but it seemed to involve trying to access the Gmail accounts of some Chinese human rights activists. Google says no actual emails were recovered, however:

We have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.

Google also said that it was not the only company to have been attacked in this way:

As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Also as part of its investigation, Google says it has also determined that Gmail accounts of some activists HAVE been accessed but not because of a Google security breach but instead do to activists being victims of malware or phishing attempts:

As part of this investigation but independent of the attack on Google, we have discovered that the accounts of dozens of US-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties. These accounts have not been accessed through any security breach at Google, but most likely via phishing scams or malware placed on the users’ computers

Google does not explicitly say that the Chinese government itself was behind or condoning the attacks, nor could I get them to confirm this in talking about the move. But that’s the implication. It makes little sense to tell the Chinese government that you’ll no longer cooperate with it on censorship because of hacking attempts unless you believe those had government approval.

Google & Censorship

To understand more about how Google has censored in China, I highly recommend reading Google’s Gatekeepers, a New York Times Magazine article from 2008 that looked in depth at the issue. On the 20th anniversary of the Tiananmen Square protests, Google also blocked all searches for those words, not just particular content that the Chinese government might have deemed illegal. Google also applies censorship to the sources it carries in the Chinese version of Google News.

The censorship is not perfect. For example in a search for tiananmen square, I got images of injured people on Google China (the first and fourth images below, reading from left to right):

Of course, if I were actually within China, the images that I see above might have been better filtered. It’s also confusing to know what anyone sees exactly, since Google shifted to personalizing results for each individual back in December.

China is also not the only country where Google censors. Google also censors in many other countries, including Germany and the US, depending on national laws.

For example, in a search for american nazi party on Google Germany, you can see that Google has censored one result as indicated by the disclaimer it shows at the bottom of the page:

Similarly in a search for Addicted To Bass Winter 2009 download on Google in the US, six pages have been removed because of a copyright infringement claim:

In China, disclaimers are also posted when content is removed, as you see here:

So one issue Google now faces is why it will now fight Chinese censorship but not censorship in other countries. The answer is likely that Google will seek to curb the widespread censorship that China demands especially on political discourse. That broad censorship, even though legal in China, may not be deemed as too restrictive and unreasonable for Google to operate under.

Google & The Chinese Market

Google has diligently worked to build marketshare in China over the years, one of the few countries where Google is not the dominant search player. When Google initially failed to censor, it found itself losing traffic due to government blocking. The current leader, Baidu, gained from this. The ability for people to find music, not always legally, on Baidu also has contributed to its growth.

In another example of its efforts in China, Google underwent a huge fight with Microsoft to retain Kai-Fu Lee as president of its China operations. Lee was formerly a Microsoft employee. In 2008, Lee said his goal was to make Google the Chinese market leader in five years. Google won the fight for Lee, though he eventually left the company late last year.

Postscript: I sent across some further questions to Google, and here’s what I’ve received from the company:

Can you say more by what you mean about intellectual property? Are you talking about some of the code that runs Gmail or what?

This is the subject of an ongoing investigation, and we simply cannot comment on the details.

It sounds like you’re saying the Chinese government was behind this. Is that the case?

We’re not going to speculate, because we don’t know. What’s clear is that the environment in which we are operating in terms of an open Internet is not improving in China. That, combined with these attacks and the surveillance they have uncovered, mean that we’re no longer comfortable self-censoring our search in China.

Is the censorship ended as of 3pm Pacific, or is there a phase out?

Via the blog post [we've said]: We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.

That suggests that censorship is continuing for the time being and may do so over the coming weeks.

Postscript 2: There’s building related coverage of the news here on Techmeme. now. I’d also recommend watching long-time China watcher Rebecca MacKinnon’s blog for her take, which I expect will appear in the near future.

Postscript 3: I’ve been talking with people on Twitter, along with some journalists who’ve called me, about the whole “Is Google doing this because it’s losing in China” thing.

No, I don’t think that’s the case at all. I think it’s a reasonable question to ask, of course. When Google first started censoring, the company’s stance was that primarily, they thought being in China overall was a good thing for the Chinese people and secondarily, it was a good business move for Google. I think people at Google convinced themselves to believe that, even though the primarily move in my mind is that they did censoring for business reasons.

Here we are three years later. Google’s losing, so it wants to get out, and this is a good excuse? Google’s still got a pretty solid share, depending on what numbers you want to look at. From Fortune, from the third quarter of last year, Baidu was by far the leader, with 77%. But Google had about 17% of the market — well behind, but almost double what Bing has in the US market. It’s a healthy percentage.

Moreover, as I often warn when it comes to marketshare percentages, you also have to look at search volume. It’s possible for a company to have its search percentage decline but the number of actual searches it handles go up. That’s because the overall search “pie” itself gets larger. A smaller slice of a bigger pie can be bigger than a big slice of a small pie. And if you look at this PC World article for about the second quarter of last year, Google’s search volume was up.

Marketshare numbers in the US are also incredibly slippery creatures. Some ratings services don’t count things like “local” results. Some of them count a search refinement as a “new” search even though effectively, the same search session is happening. These same complication likely apply to estimates of the Chinese market. And what’s the revenue per search? In September, Forbes had a chart showing that Google’s revenue in China has risen in the past few months while Baidu’s had dropped.

Don’t get me wrong. Baidu is the Google of China, in terms of being dominant. Baidu seems as much a habit to Chinese searchers as Google is for searchers in other countries — and it’s tough for any challenger to break a search habit.

But are things really so dire for Google that it suddenly and abruptly threw in the towel today? Over at TechCrunch, Sarah Lacy talks about speaking with former Google China head Kai Fu Lee and his sense that Google couldn’t win as supporting evidence that today’s move was all about business:

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.

It’s important to look at the two sentences separately, which is why I’ve italicized the second one.

Let’s take the first. I’ve never spoken to Kai-Fu Lee, nor do I know him well. I do know Google fought hard to bring him in to China and after doing so, it didn’t grow. Was that because Lee himself wasn’t able to do it? Because Google itself simply can’t do it, because of the Baidu habit? Because of a variety of reasons out there? I don’t know. I do know that all this statement tells me is that Lee himself didn’t believe he could get Google into a winning position and decided he didn’t want to be leading a number two entry — not that Google was necessarily doomed to be a weak number two.

That leads to the second sentence. It’s easy to read that as if Lee himself is saying Google decided that doing business in China wasn’t worth it. It’s not. That’s Sarah Lacy making that statement — her opinion. Perhaps correct, perhaps not (just as my own opinion on this might be right or might be wrong). But it’s very important that it not be read as Lee himself saying he left because he thought Google had given up.

As I said on Twitter, Sarah seems far more a China watcher than I am. I’ve never even been to the country. So maybe she’s got a good read of the situation about Google’s prospects. Nor do I disagree that Google had a huge challenge ahead of it and potentially might not ever beat Baidu.

But seriously, this is how it gives up? I think you have to be really, really cynical to choose this as among all the reasons for it pulling out in the way it did. You have to assume Google decided this would somehow cloak its China failure (and if that was the case, it’s only highlighting it to some). Potentially, Google might have thought this was a good way to put pressure on the other challengers in China — Bing and Yahoo — to pull out. After all, they’ve been under political pressure here in the US to stop doing it. That pressure will probably grow.

While I’m not a China watcher, I am a long-time Google watcher. As I look at how the company has reacted, though the prism of my knowledge of what Google does and why it does things, this is personal.

Look, it was incredibly disappointing when Google agreed to censor in China. I felt if Google couldn’t stand up to those demands, with its “Don’t Be Evil” motto, who would? And before I roll out the big bravo in the way that the EFF did today, I’m waiting to see that the censorship has really stopped with solid confirmation of it. Even then, glad that I’ll be for it to stop, it’ll still be tinged with disappointment that Google did it in the first place.

But what really made Google “get” that censoring in China was wrong, when so many said this three years ago? I think it’s because this time, Google’s “kids” were attacked.

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.

Postscript 4: The Wall Street Journal has a piece saying the decision was “hotly” debated among Google execs. CEO Eric Schmidt was worried about a possible backlash (from whom, the Chinese government? Google investors? That’s not said). Google cofounder Sergey Brin is suggested as a driving force for pulling out.

Brin was vocal shortly after the decision was made in 2006 that he felt Google had compromised its principles and made many wonder if the company would change its mind back then. Last January, Brin again expressed misgivings, calling the decision to censor a business “net negative.”

Meanwhile, via Rebecca MacKinnon, a picture of Chinese leaving flowers at Google’s headquarters in Beijing, I assume in support of the company’s move.

Postscript 5: Microsoft sends me this:

We have no indication that any of our mail properties has been compromised.

I also asked if Microsoft would cease censoring results on Bing China (the company has an incredibly tiny share of the market using this). I didn’t get a response on that. Microsoft recently came under fire when it was found that the regular version of Bing hosted outside China and aimed at anyone in general appeared to have Chinese censoring going on. The company responded that this was a bug.

This is a good point to note that Google does not censor on its main site, Google.com. Chinese have been able to get uncensored results from that site even after Google agreed to censor on its Chinese site. The challenge has been that they would find that clicking on links at Google.com often would not work because of Chinese blocking. Sometimes, people can get redirected to Baidu.

Yahoo sent me this:

Yahoo! is committed to protecting human rights and takes our users’ privacy and security very seriously. We condemn any attempts to infiltrate company networks to obtain user information.  We stand aligned with Google that these kinds of attacks are deeply disturbing and strongly believe that the violation of user privacy is something that we as internet pioneers must all oppose.  Yahoo! sold its China business in 2005, and while maintaining a financial investment, we no longer have operational control over the Yahoo! China business. Yahoo! is committed to protecting our users’ rights to freedom of expression and privacy.  You can learn more about our human rights efforts here: http://humanrights.yahoo.com.

You had also asked if Yahoo! was attacked.

Yahoo does not disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach. If you need to, please also feel free to attribute that to a Yahoo! spokesperson.

Postscript 6: Microsoft has sent me this further statement:

We are aware of the situation involving attacks against the corporate networks of Google and a number of other companies.  At this point, we don’t have any indication that our corporate network or any of our mail properties were attacked.  We work closely with the authorities and other technology companies like Google on Internet safety issues, and we will continue to actively monitor this situation.  As Google and the State Department have indicated, this situation is the subject of an ongoing international investigation, so it is not appropriate to say anything further

See also our recap of reactions, Google’s China Gambit: Day Two Reaction.

Google China Music Search ranks music on the home page by some form of popularity metric. You can clearly search by artist name and other criteria. You can even download the DRM-free music in mp3 format at a rate of 192kbps. Google offers the ability to stream the music via a Flash player. Lyrics are also provided in a pop up window. The pages seem to contain advertisements but I am not sure if the revenue is shared with the musicians.

In February, Danny wrote a piece named Google To Fight Baidu In China With Legal Music Downloads? That article goes more into the other services available in China and some of the challenges Google will have in the Chinese market.

Baidu has been plagued with copyright lawsuits over music search in the past; the most recent news we have is that they beat the music labels in court.

Postscript: A Google spokesperson gave us a statement clarifying the ads in this application:

Google does not share in the revenue generated by advertising in connection with its Music Onebox product in China. All ads visible on the product in connection with the product run on Top100′s website and revenues from those ads are shared between Top100 and its music label and publisher partners.

Two years after Google Inc. began a big push in China, Baidu.com Inc. continues to dominate the country’s Internet search market, thanks in significant part to a controversial and legally risky offering: searches for free, unlicensed music downloads.

Now, Google is preparing a counterstrike, according to people close to the situation. The U.S. search giant is in the late planning stages of a joint venture with a Chinese online music company that would permit it to provide free — licensed — music downloads in China.

The service, which is likely to offer access to tunes from three global music companies as well as dozens of smaller players, could start in the next several weeks barring any last-minute hiccups. The music pact marks a turning point in Google’s battle with Baidu to gain dominance in an Internet market that is soon expected to surpass the U.S. this year in number of users.

The report notes that 7 percent of Baidu’s traffic is from access to free music, but that Baidu has been a target of copyright actions because of this. Of course, just last month Baidu won a copyright case against it (Baidu Beats Music Labels In Music Copyright Case Again), so those copyright issues haven’t seemed to slow it down over the years. In contrast, Yahoo China in December lost a case (Yahoo China Loses Case On Linking To Unlicensed Music).

Things might change more, however. A global music trade group is targeting both Baidu and Yahoo with new cases asking for thousands of sites to be removed.

Google hasn’t been targeted in music cases, the Wall Street Journal says, since it hasn’t offered a music search feature. To avoid such actions, plans are said to involve files that are digitally watermarked. These files, from a variety of record labels, are already offered via Top100.cn. Google is said to be partnering with Top100.cn to provide enhanced search and other features.

For some background on the importance of music search to Baidu historically, the China Online Search Marketing Survey Report (PDF) in 2005 found that more people were searching at Google for web results, reference info, shopping, and business material than at Baidu. Baidu’s big search area was downloadable music. Similarly, a Keynote study in 2006 found that Google beat Baidu in many customer satisfaction areas, including general search quality, image search quality, and news search quality. But it was Baidu that ranked tops for music search quality.

For further discussion, see related stories on Techmeme.