Google vs. China - Business vs. Censorship?

In a week when Google (NASDAQ:GOOG) announced that it was potentially going to close down its China operation, ITV, Britain’s largest commercial broadcaster announced that it was moving in through a partnership with Chinese state broadcaster Hunan Satellite Television. Chasing lucrative business opportunities in an environment where government censorship and control is high continues to be a fine balancing act with many affected business preferring to remain silent. Google has decided to buck the trend. Why now ? Why this way?


A Tale of Two Industries
Both Google and ITV cited government censorship and state control in their relevant announcements. For Google, the recent targeted attacks on the gmail accounts of some of their customers has triggered a publicly declared rethink of the terms and conditions under which they should continue to do business in China. Google has not said that these attacks were Government sponsored but on a personal level they are concerned with the particular group of people that were victims of the attacks. On a broader basis, the sustained and systematic cyber-attacks that are said to originate from China have given Google an opportunity to go public with its general feeling on the Chinese market. Simply put, Google no longer want to do business where the government continues to require censorship of search results and content despite having agreed to those terms in 2006.

On the other hand ITV are following the line that Google took back in 2006. They recognise China’s continuing rise in global importance along with the market opportunity that it presents. They want a piece of the business available and are prepared to operate under potential terms of censorship. No doubt, ITV will keep an eye on developments that relate to infringement of civil rights and privacy. As to how this will affect the way in which the Hunan / ITV partnership develops only time will tell.

What Has Changed For Google?
Certainly the conditions under which Google are required to operate in China have not changed. Google have changed. They are more dominant in the markets in which they operate and have become more powerful. With that comes the ability to try and set their own terms wherever they operate and so it is with China’s continued censorship of search results and content. However, they are not dominant in China and despite gaining ground there are question marks as to whether this is at all possible.

Poiitical Change Or Market Withdrawal?
Perhaps, if they were to win this battle and be able to offer totally uncensored search, they could leapfrog the incumbent Baidu (NASDAQ:BIDU) and claim their customary first spot in yet another market. Thet also get brownie points for effecting social and poIitical change. If they do not win this battle and go ahead with the threatened closure they get to exit a market that they have not been able to dominate without the negativity associated with a high profile market withdrawal.

And The Reality Is?
Google’s Android is growing in popularity in China. Pulling the plug on that community is not an option and with mobile internet surging in popularity now is not the time to withdraw from the market. China hosts a Mobile Internet Summit in April 2010 which has been declared as a “new era for mobile internet”. This is a space that Google has made clear that it is very interested in and is therefore unlikely to stay away from this market.

Ade Bamigboye, CEO Mobile Flow