Google in China

Google in China

Background

Google was founded in 1998 by Larry Page and Sergey Brin, two Stanford University graduate students who had developed a superior search-engine technology to find and organize information on the Web. The company attracted users quickly through making Internet searches simple, quick, effective, and unbiased. Consistent with its core principle of “Do no evil,” Google displayed search in order of calculated relevance to users rather than in order of advertising payments.

As of 2000, Google maintained a presence in China through a Chinese-language version of Google.com but had no locally based operations or employees. In 2005, Google set up a research and development center in China staffed by highly skilled and well-compensated software engineers. By 2009, Google’s workforce in China had grown to some 700 people. Revenues in 2009 were an estimated $300 million.

Google’s January 12, 2010, statement regarding the company’s unwillingness to tolerate censorship had threatened to disrupt ongoing business relationships in China. Ever since it entered China, Google had had concerns. The Chinese government was determined to control the flow of information on the Internet and insisted on removing information from search results that it considered politically objectionable. It’s clear that search results deemed to be sensitive for political reasons are inaccessible within China. Google had posted an online memo stating that the company had detected highly sophisticated attacks originating from China on its computer systems. It had concluded that it was no longer willing to censor search results and would initiate discussion with the Chinese government to operate Google.cn without censorship; it would exit China if its conditions were not met.

Analysis

There were two big problems that Google met:

First, Google's conduct and strategy in China was inappropriate

Google.cn had entered China since 2005. During almost five years operation, Google's China market share is not a significant amount which was only about 30% of its biggest competitor, Baidu. Baidu (NASDAQ: BIDU) is no doubt the largest search engine company in China. In 2008, Baidu has 73.8% of the total China internet searching hit, according to iUserTrack report. Google and Yahoo combined market share is 22%.

Actually, Chinese citizen could use both Google.com and Google.cn Web and it seemed that former Web had more market share and advertising revenue. Google’s 99% of market share came from Google.com, only 1% of Chinese citizen used Google.cn. This was mainly because Google.cn hard compete with Google.com both in quantity and quality of results. However, Google.cn was the mainly product that