A case study on Google China for a class assignment.

1. SYRACUSE UNIVERSITY
Google China
Assignment 5
Manan Kakkar
2/26/2012

2. IST 755: Google China 1
Manan Kakkar
Table of Contents
Looking Back ................................................................................................................................................. 2
For and against entering China ................................................................................................................. 2
2005 Mistakes ........................................................................................................................................... 3
The 2010 saga and key factors to exit China ................................................................................................ 3
Into the future............................................................................................................................................... 4

3. IST 755: Google China 2
Manan Kakkar
Looking Back
In an attempt to capture the global market, Google introduced a Chinese version of Google.com in 2000.
A translation of the US version, users from within China were provided results that took quite a while to
appear. Around the same time, the Chinese government was developing an Internet infrastructure that
let them control the flow of information.
For and against entering China
In 2005, at a board meeting Google decided that it was time they entered China with a local version of
Google, hosted within China. Then Google CEO, Eric Schmidt, and Asia-Pacific VP, Sukhinder Singh
Cassidy made a strong case for a google.cn.
In a July 2005 report by the China Internet Network Information Center (CNNIC), the country had 103
Million Internet users (CNNIC, 2005). The number constituted to 11% of the world’s online population.
In addition to the considerably high number of Internet users (for 2005), surveys showed that nearly
38% of the online population used the Internet to seek information. And 58% used search engines
(Lawrence, 2009). This roughly comes to 22 Million users who would use a search engine. The numbers
and competition in China made a compelling case for Google establish a competent position in the
country with alarming rates of Internet growth. In addition to using search engines, the survey showed
that users in China were interested in obtaining news from Western sources. Google News, the
company’s product introduced in 2002 (Bharat, 2006), would have helped the company attract users.
Within a year of launching google.cn, the company did not capture any major market. Google was a
distant third compared to leader Baidu.com (43.9%) and Yahoo China (21.1%) (Google China Search
Revenue Lags Yahoo, Baidu, 2006). However, looking back, by 2009, Google had more than doubled
their share and taken the second spot in search market rankings. Google China contributed $300 Million
in revenues and had 31% of the market (Quelch & Jocz, 2010).
To summarize, the following were very strong reasons for Google to enter China in 2005:
• Rapidly growing Internet population
• Nascent search market
• End-user’s need for a fast & local search engine
• Source of revenues and talent
Since their partial entry in 2000, Google had been blocked twice (Lau, 2010). In a 2002 report published
by the BBC, Google as blocked in China to comply with government regulations on content (China
blocking Google, 2002). The company was not new to the laws of the land. When the company
introduced google.cn, they complied with the same laws and restricted access to content that was being
filtered by the Chinese government on Google.com’s Chinese version. As a result, other than better
performance, there was little incentive for Google to enter China.

4. IST 755: Google China 3
Manan Kakkar
2005 Mistakes
The company also failed to understand how the end-user in China was using Internet as a source for
information. Google’s Asia-Pacific VP, Sukhinder Singh Cassidy pointed out that Google was seen as a
foreign company and they needed to change the perception (Lawrence, 2009). In addition to this,
Google was not able to offer the same range of products that competitor Baidu had; for example,
Instant Messaging and a variety of entertainment services. Baidu on the other hand, had these services
and attracted more users. To summarize, following are the strategic points Google missed in their
analysis of China:
• Adhering to local laws and restricting access to content
• A perception of being a foreign entity and having little local pedigree
• Lack of a suite of information, social and entertainment services
The 2010 saga and key factors to exit China
In early 2010, reports of cyber-attacks on Google’s web properties surfaced (Girouard, 2010). The
attacks were targeted at Chinese human rights activists (Drummond, 2010). The information and
sophistication of the lack led Google to come out strongly against the restrictions laid by the Chinese
government. The company hinted at shutting down their operations in China if the censorship was not
lifted. The company called the Chinese government’s bluff and on March 22nd redirected all google.cn
users to their uncensored Hong Kong site—google.com.hk (Drummond, A new approach to China: an
update, 2010). This announcement was met with jubilation by the activists against censorship. Google
became their hero and voice against censorship. Morally, Google might have done the right thing
however, Google is a business. Unfortunately for Google, even by 2010 the company was not able to
garner capture considerable market share from competitor Baidu.com. The company’s decision to
redirect google.cn traffic to google.com.hk was not acceptable to the Chinese government. Officials
from the government made it clear that Google’s license to operate in China will be revoked if they
continued the redirect. As a result, three months later, on July 9th, Google announced that they will stop
the redirect (Drummond, An update on China, 2010).
To summarize, following were the reasons to shut down Google.cn, from Google’s point of view:
• Lack of transparency from the Chinese government
• Severe content censorship
In hindsight, Google’s decision to temporarily shut operations in China was poorly timed. With their
Internet Content Provider license coming up for renewal and their lack of market control, the company
had little leverage against the government. If Google were to shut operations or continue with a protest,
as pointed out by, Alexei Oreskovic, Google’s official in China could have been prosecuted (Oreskovic,
2010). In addition, Google would have left more than 80 Million users stranded (Quelch & Jocz, 2010)
and affected their partners like Samsung, HTC and Motorola who were working on handsets based on
Google’s Android.

5. IST 755: Google China 4
Manan Kakkar
To summarize, here’s why Google’s decision to exit China was poor:
• Their license to operate in China was about expire, this meant they had no leverage
• The company was not a market leader hence did not command large user support
• Google’s decision in abandoning search would have affected their other products and partners
Into the future
China is an integral part of today’s global economy. For any company to operate in a global environment
they need to respect the laws of the land. Google’s decision to list all search results and showing a
disclaimer that access to the webpage has been restricted by the government is an amicable solution. It
is for the people of China to fight for their rights, and not Google’s responsibility to take lead against
communism. Google has announced successful numbers despite being behind Baidu:
• 96% of China’s 485 Internet users use Google services (Dan, 2011)
• $640 Million revenues in China (Jackson, 2011)
Google is a private company and they answer to their shareholders. The success of services like
Baidu.com, Renren, Youku.com, and Sina Weibo are strong cases (Walker & Cook, 2011) that Google can
succeed by working within the frameworks defined by the Chinese government. Google should continue
working on making their products more cohesive, local and targeted for the Chinese users. The company
should work with the government to find ways to let users in China access to services like YouTube that
are major revenue generators for the company (Lawler, 2010).

6. IST 755: Google China 5
Manan Kakkar
Bibliography
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http://news.bbc.co.uk/2/hi/technology/2231101.stm
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Bharat, K. (2006, January 23). And now, News. Retrieved February 26, 2012, from The Official Google
Blog: http://googleblog.blogspot.com/2006/01/and-now-news.html
CNNIC. (2005). 16th Statistical Survey Report on the Internet Development in China.
Dan, Z. (2011, September 30). Google claims revenue growth in China despite relatively low market
share. Retrieved February 26, 2012, from ZDNet: http://www.zdnet.com/blog/china/google-
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Drummond, D. (2010, January 12). A new approach to China. Retrieved February 26, 2012, from The
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http://www.ft.com/cms/s/0/faf86fbc-0009-11df-8626-00144feabdc0.html#axzz1nXjBTdP4
Lawler, R. (2010, March 5). Citi: YouTube to Top $1B in Revenues in 2011. Retrieved Feburary 26, 2012,
from GigaOm: http://gigaom.com/video/citi-youtube-to-top-1b-in-revenues-in-2011/
Lawrence, A. T. (2009). Google, Inc.: Figuring out to deal with China. In E. R. Mills, The Dark Side (pp.
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2012, from Reuters: http://www.reuters.com/article/2010/02/05/us-google-china-analysis-
idUSTRE61408520100205

7. IST 755: Google China 6
Manan Kakkar
Quelch, J. A., & Jocz, K. E. (2010, January 21). Google in China (A). Harvard Business Review.
Walker, C., & Cook, S. (2011, December 27). China's Parallel Online Universe. Retrieved February 26,
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online-universe/