Tuesday, January 12, 2010

Google Pullout From China - Will Internet Majors Rally Behind Google?

. Tuesday, January 12, 2010

By stockOzone team

Google has embarked on a game of brinksmanship in China, saying it may quit the world's biggest Internet market by users after hackers apparently looking for information on dissidents broke into its China site.

The world's dominant search firm may be hoping other search and e-mail leaders, both global and domestic, will rally around it in calling for China to lighten a heavy-handed approach to the Internet that includes frequent censorship and allegations of government-backed hacking.

The move for Google would be relatively straightforward, as its main China businesses are currently mostly limited to search and e-mail, and are believed to account for a relatively small part of its global revenue.

But global search and e-mail giants such as Microsoft and Yahoo, and big Chinese players Baidu, Sina and Sohu have other factors to consider before joining ranks with rival Google.

Following are how some top global and domestic players are likely to respond to Google's attempt to throw down the gauntlet:

The world's largest software company has huge vested interests in China and is pumping more resources into the country. Computer sales there now top 40 million a year, many preloaded with legal copies of Microsoft's Windows operating system, the company's core franchise and main breadwinner.

Microsoft has also invested millions of dollars in China, opening a network of research and development centers employing thousands of software programmers, all aimed at showing its commitment to the world's No. 2 market for PC sales.

Most recently, Microsoft has launched a Chinese version of its highly hyped new search engine, Bing, and has said the market will be a top priority.

Given all it has at stake in China, Microsoft could have a hard time withdrawing from part or all of the market, and could be reluctant to take any steps seen as hostile at the risk of endangering its wide-ranging interests.

Like Microsoft, Yahoo's position in China is complex.

After a largely failed attempt at going it alone in the market, Yahoo invested $1 billion for 40 percent of Alibaba Group, parent of Hong Kong-listed Alibaba.com and operator of two of China's leading online commerce sites.

That stake has since grown several-fold in value, and, despite a sometimes testy relationship, Yahoo CEO Carol Bartz has said her company sees Alibaba as representing its main presence in China.

Given the size of its Alibaba investment and Alibaba's overwhelming reliance on the China market, Yahoo could find it difficult to take a tough stand against government Internet meddling in China and risk potential fallout for Alibaba.

China's three oldest major Internet firms, Sina, Sohu and NetEase.com Inc, all operate e-mail services in China and are careful to steer clear of content and other actions that could raise the ire of government censors.

From their original roots as Web portals, all three have diversified into other services, from online games and e-commerce to mobile added-value services and search. Given their almost 100 percent reliance on the China market, the trio would be the least likely to join hands with any movement by Google.

In the search arena, Google's main China rival, search engine Baidu, self-censors itself in accordance with Chinese law to avoid sensitive, mostly political, topics.

Like Sina, Sohu and NetEase, Baidu would be highly unlikely to Google in standing up to Chinese censors due to its near-total reliance on the China market for all its business.

Disclosure: Author does not own any of the stocks discussed here.

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Tech Smart said...

Certainly the move will boost the other search engine makers to eneter in the largest internet market. China was putting pressure on google since long. After all the major search engine company decided to pullout its operation from china.

Tarique Khan said...

The move will certainly a boon for other search engine players. Particularly it will boost the market share of Chinese Search Engine Baidu.

Liu said...

we absoultely not care google threaten to leave China, this nothing for us .google is not only one company which can supply search and others service in this field .google ,do not think you are very very very important for Chinese .if you want to expand in China ,you must comply with our law.

Anonymous said...

It is about time a key American corporation looks past the double digit growth rates of China's economy and does the right thing and call them out on its subversive behavior, its abuses on human rights, and its demand for censorship at the detriment of its people. To the Chinese Government - lets hope this is the beginning of the end for your desire to choke out information that does not benefit your objectives and to illegally fish for propitiatory information that benefits you and hurts your competitors.

Anonymous said...

Google is leaving China because it could not face competition from Baidu.

Anonymous said...

Google's change of heart over China raises wider issues, says regular commentator Bill Thompson. See http://news.bbc.co.uk/2/hi/technology/8456622.stm

Liu said...

Threatening to pull out of China is like threatening to spit on a whale!!!

Piao, Germany said...

"This is not the first time Google threatens to pull out of China.

"I don't think censorship is the main reason; the main reason is that its market share is very small, it is no match to Baidu (the Chinese search engineer), it can't make money, so it wants to pull out.

"Censorship and cyber attack is just a pretext." - Piao, Germany

Ken Jones said...

You are spot on!.

-Ken Jones

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