Yesterday Google announced that actions do not go unpunished. In this case a large scale cyber attack on Google’s (among others) infrastructure prompted their refusal to continue censorship of Google.cn search results, and to threaten that they may pull out of China’s search market completely. It appears that the attack was motivated by efforts to obtain Chinese human rights activists’ information.
At first glance Google’s standoff with the Chinese government over this breach of its security evokes two reactions. The first, motivated by business logic, questions the seeming craziness of leaving the fastest growing and largest market (measured by population) in the world. The second applauds an iconic corporation for standing up against censorship laws and the spurious politics of a major government power.
Both these initial views of Google’s actions are overly simplistic. It is unlikely that Google’s motivations are purely altruistic. I say this because of Google’s track record. Historically they have tended to abide by all laws in a country of operations regardless of the politics. Just last week the Wall Street Journal ran a story about Google’s compliance with Indian censorship laws a perfect example of how Google’s business relies on playing by the rules so to speak. Therefore, in understanding Google’s threat to pull out of China I turned instead to a set of business motivations. Based on this lens here is my analysis of why Google can afford to and may choose to pull out of the Chinese market (atleast for a while)
1. If Google pulled out of China there would be little short term impact. They would stand to lose a potential $600 million (according to JP Morgan) a number representing just over 2% of their estimated revenue of $26billion.
2. Google is built on trust from its user base. A cyber attack that compromises the faith of users in Google’s security is simply bad business.
3. The nature of the emerging networked information economy in which Google functions amplifies the effects of a breach in security and can lead to widespread mistrust thus affecting many more markets than just that in China.
4. By pulling out of China a market in which is currently dominated by Baidu search Google may have achieved the ultimate marketing coup: Marketing through absenteeism. Twitter conversation indicates that many in China will feel a strong sense of loyalty to Google and a new sense of loss if Google decides to leave. Tweets such as –“@qhgy RT @Lyooooo: If Google leaves I won’t use Baidu or let my children or grandchildren use it (If I have them) #GoogleCN” indicate that perhaps Google’s absence will only serve to grow their brand, so that upon a return they will enjoy a much higher usage than prior to their departure.
These four factors contribute to my belief that Google’s motivations are far more rooted in classic business than in forward thinking corporate activism. When push comes to shove Google may very well bow out of the Chinese market, at least for the short term; however, I doubt that decision will stick forever, and we’re bound to see Google return perhaps once they’re more confident in their security, Baidu loses footing in the Chinese market, or the Chinese market becomes too important (in Google’s worldview) to ignore.
-Emily at Banyan Branch
