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Google is desperate in China

January 14th, 2010 · 5 Comments

I guess I’m in the mood to stir some controversies. :-) This morning, I read What Google is up against in its China showdown on Seattle’s TechFlash blog, written by a Chinese American and so-called long-time China watcher. I disagreed with many of the points on the article. So, I left a long comment on TechFlash.

I figure you might be interested in what I wrote. So, I’ve re-produced my comments below to share with you:

The author of this article showed a lack of understanding of China and the dynamics of internet industry in China. Just finishing up the Three Kingdom book doesn’t make him understand the strategic thinking behind Chinese leaders.

Google is in the business of making money. It will not pull out of China. This is a PR stunt by Google. It’ll return back to the negotiation table and compromise.

One could even argue that Google is desperate at this point — it’s like a football team that is losing a game, and it has to start picking a fight to stop the momentum of its competitors.

Google has done very poorly in China. About five years ago, Baidu’s CEO predicted that Google would become irrelevant in China in five years. Everyone thought he was crazy. Now, looking back, his prediction might very well be correct. Google’s execution in China has been very poor — the main reason of Google’s failure is not because of lack of intellectual property protection or human right or government censorship in China.

If you ask any Chinese internet users, they will tell you that they use Baidu because it’s a better search engine to find Chinese content.

Finally, Google’s threat is going to back fire — in fact, it’s already happening. Google’s Chinese employees were not notified of the threat in advance, and suddenly found out that they couldn’t access Google’s internal databases. There are a lot of frustrations among Google China employees. They are caught off guard.

Furthermore, there is a huge outcry among the Chinese internet users — there is strong nationalistic sentiment among Chinese youth who were born after 1980. They’re angry about Google’s threat.

I’m afraid that Google needs another PR campaign to improve its image among Chinese internet users.
So, in contrary to what’s being reported in American media, Google’s threat is not that smart a strategic move after all.

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Tags: Company Analysis

5 responses so far ↓

  • 1 grantcrow // Jan 14, 2010 at 11:02 pm

    I disagree that Google has done poorly. Baidu's market share has dropped from 70% 2 years ago to 58% now. All of that has been lsot to Google. To have accumulated 35% share of the China market under the conditions it operates is, in my view, a good performance.

  • 2 GeekMBA360 // Jan 15, 2010 at 12:09 am

    Where did you get your data that Baidu's market share dropped to 58%? According to this report (http://www.webpronews.com/topnews/2009/08/06/go…), Baidu has 75.7% market share.

  • 3 grantcrow // Jan 16, 2010 at 12:52 pm

    I was in China last week and these were the figures stated in the South China news when the news was being debated. It does seem strange that your source and mine are so different!

  • 4 Bing // Jan 18, 2010 at 1:16 am

    My friend, Baidu, despite the bravado, is making $500 million sales a year. While Google's cash account as of Q4 2009 was $23 billion. Let's say Google has 1/2 of Baidu's revenue and incurs a 20% lose every year. That is roughly $50 million a year? Let's be even more generous, say Google loses $100 million a year. Still, Google has enough cash to burn Google China for 220 years or 10 generations.

    If Google doesn't need Chinese Yuan to go on, where does a Chinese find an alternative to Google? Baidu? Well, it does tell the Chinese everything he wants to know. But if you think that is enough for China, then I have to say, at the end of the day, it is the Chinese who are screwed if Google pulls out, no pun intended.

  • 5 Bing // Jan 18, 2010 at 6:16 am

    My friend, Baidu, despite the bravado, is making $500 million sales a year. While Google's cash account as of Q4 2009 was $23 billion. Let's say Google has 1/2 of Baidu's revenue and incurs a 20% lose every year. That is roughly $50 million a year? Let's be even more generous, say Google loses $100 million a year. Still, Google has enough cash to burn Google China for 220 years or 10 generations.

    If Google doesn't need Chinese Yuan to go on, where does a Chinese find an alternative to Google? Baidu? Well, it does tell the Chinese everything he wants to know. But if you think that is enough for China, then I have to say, at the end of the day, it is the Chinese who are screwed if Google pulls out, no pun intended.

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