Google (GOOG) at war with China

By: ispeculatornew
Date posted: 03.23.2010 (4:00 am) | Write a Comment  (12 Comments)

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There had been speculation about an outcome for several weeks now ever since Google (GOOG) had announced its intention to stop filtering search results. And finally it happened today, Google took drastic action basically taking action against the Chinese government. It took the step of redirecting all traffic from its Chinese website, Google.cn to its Hong Kong operations. There users can find an unfiltered search engine in their language. This is a direct attack towards the Chinese government and it did not take much time to generate reactions:

-“This move is totally wrong” – Xinhua (Chinese official news agency).

-“They stressed that foreign companies in China should abide by Chinese laws, and if Google is willing to abide by Chinese laws, we continue to welcome it operating and developing in China. If Google insists on dismantling the search service of its Chinese website, that is Google’s own affair. But it must follow Chinese law and international custom, and responsibly handle the aftermath.” – Chinese Official

Google carefully explained its decision on its own blog. This was not a mistake, not an error, it was a carefully planned move, that had been discussed with the US government with even Barack Obama being kept informed about the process that led to this outcome. What’s most clear is that this is a bold move. No matter how powerful Google might be (and it clearly is very much so), this is a bold move that could have massive implications for internet users in China as well as all companies involved in the Chinese market.

It is an interesting strategy because it is not illegal. The Chinese website owned by Google does not display unfiltered results, which would have made it easy for Beijing to kick out the internet giant. But let’s face it, the result is the same and the ball is now in China’s camp. It can now either block Google and deal with internal problems or a less likely scenario would be for China to now compromise or be more flexible with Google. How likely is that to happen? I’d say almost impossible. China considers itself a world power and surely hates to see Google challenge its power right now.

The winner?

Of course Baidu right now is looking like a very bright star. There is no doubt that the Chinese government will be on Baidu’s side in the near future. I had been hesitant to take a position on Baidu but I’m getting more comfortable with the idea and might become even more so when it becomes more clear how the Chinese government will react to Google’s recent challenge…

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12 Comments

  1. Comment by IS — March 23, 2010 @ 4:10 am

    Here are two interesting links regarding the story:

    NY Times Interview with Sergey Brin: http://bits.blogs.nytimes.com/2010/03/22/interview-sergey-brin-on-googles-china-gambit/?src=tptw

    Google monitors China’s blocking of its services: http://www.google.com/prc/report.html#hl=en

  2. Comment by John Hughs — March 23, 2010 @ 8:13 am

    Google stocks likely to plummet in value.

  3. Comment by Zavi — March 23, 2010 @ 8:15 am

    arrghhh!! that’s a big bet!! we’ll see what is China’s next move!

  4. Comment by Jack — March 23, 2010 @ 8:21 am

    Now Android won’t go anywhere! Apple & MS will be very happy to see stupid Google businessmen.

  5. Comment by Bilanski — March 23, 2010 @ 9:19 am

    Whoever gave Google business advices should be fired. Other than thumbing their nose at the Chinese to appease the human-right types, they won’t achieve anything else. If people have doubt how the Chinese take this, just imagine a Chinese company tried to pressure Uncle Sam to change the law, rightly or wrongly, to suit their purpose. Not even the freedom-fighters inside China will feel comfortable about Google’s move. Do not mention they had bad experience in 19th century with gringos forcing their way into their door demanding special priviledges for foreigners.

  6. Comment by John — March 24, 2010 @ 8:49 am

    Never trust a communist. The real legitimate Chinese non-communist government is in Taiwan! Screw mainland China. F China.

  7. Comment by Carl — March 24, 2010 @ 9:55 am

    China accounted for ~2% of Google revenue, at $540 P/E is 26, compared to Yahoo’s at 38 and Baidu at 97 (GASP!). Google is CHEAP, Baidu is EXPENSIVE and can’t hold.

    I may be the contrarian here, but Google’s move strengthens it in the developed world (Europe, Taiwan, Japan) and emerging markets (India, Brazil) where standing for something just burnishes the brand. It should make any American proud. I’m happy to make a buck trading the Chinese economy, but Google is actually trying to do good, more power to them.

    c.

    (BTW I am long Google.)

  8. Comment by Zavi — March 24, 2010 @ 12:51 pm

    That’s crazyy!!! Now GoDaddy has publicly follow Google’s example in responding to the Chinese government’s censorship of the Internet. At Congressional-Executive Commission, GoDaddy has decided to stop registering domain names in China… The war has officially began!

  9. Comment by kyle — March 25, 2010 @ 11:45 am

    It’s like William Gibbson’s future… Eventually corporations will be as powerful as national governments, with their own armies, etc.

    I’m excited.

  10. Comment by IS — March 26, 2010 @ 4:05 pm

    @Jack – Android won’t go anywhere because of China????

    @Bilanski – Difficult to judge I’d say..we don’t know what was being asked from Google and from what they say, it was a lot more than censorship… maybe not the ideal way to do it… but I would say it’s difficult to say.

    @John – LOL:)

    @Carl – Maybe true, and I personally love Google but Baidu is difficult to short, it has a lot of short term upside….

    @Zavi – Yep, amazing.. Dell also might join in

    @Kyle, have a link, never heard of that but it does seem legit

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