Google's High-Stakes China Gamble

China and Hong Kong flag with laptop with Google logo on screen. CBS/ AP

If you go to Google's investor relations Web site, you'll see a link for the Google Code of Conduct, which begins, "don't be evil."

Yet, depending on how you define evil, Google's willingness - until this week - to allow the Chinese government to censor Web results might just qualify. On the other hand, the company's decision to offer only uncensored results from its newly relocated servers off the mainland could be seen as a push for democracy - or at least freedom of speech.

As part of the cost of doing business in the People's Republic of China, Google allowed its Web searches to be filtered. For example, a search for Tiananmen Square might not bring up a site that described the role of the Chinese government in crushing dissent.

Google was never happy with this arrangement, but put up with it until its servers and the Gmail accounts of Chinese activists were hacked earlier this year. As a result, Google said enough was enough and that it would stop cooperating with China's censors.

The search giant reportedly attempted to get China to lift the censorship, but, failing that, decided to just move its search operations to Hong Kong. Google says it intends to keep a sales office and research and development facilities in China, though the sales team may wind up with less business going forward.

Hong Kong, a former British colony, operates under a different set of rules than the rest of mainland China. As a result, Google can offer its unfiltered search there.

While shifting the servers to Hong Kong may seem like a brilliant end-run around Chinese censorship, it's more of a symbolic victory.

Thanks to "the Great Firewall of China," authorities in Beijing have the ability to block access to Google.hk or allow access but prevent people from going to links found in a Google search. It's even possible for Chinese censors to prevent mainland users from seeing the results of a Google search even if they access the site. So, at the end of the day, if China wants to keep its 400 million online users away from Google or from search results, it can do that.

China Responds after Google Skirts Censors

However, information has a way of seeping out, and China's efforts to suppress the Internet will not succeed in the long run. I'm not saying this out of ideology (though I do believe in freedom of information), but from history.

The Soviet Union was able to remain intact despite the considerable military strength of its foes, but wasn't able to withstand the power of the fax machine and early e-mail systems used by activists. There will be people in China who have the know-how and skills to get around the filters, just as there are students in America who know how to get around school content filters.

More on Google in China

Google, China Battle over Hong Kong
Google Defies China on Web Censorship
China's State-Run Media Chastise Google
Google Partners in China Get Antsy
Report: Google Taps NSA for Cyber Defense
Google Not Only Target of China Hackers

But while information may be free, running a company like Google requires resources, business deals and advertising revenue. Because of its revenue stream from other parts of the world, I'm sure Google could operate Google.hk indefinitely without a yuan of Chinese revenue, but this move is likely to have at least a small impact on Google's bottom line. Also, there is the prospect that Google might be denying itself a very profitable market.

The New York Times reported that China Mobile, the country's biggest cellular carrier, might cancel a deal to put the Google search engine on its home page. There is also speculation that the country' second largest carrier might delay or cancel plans to introduce a cell phone based on the Google Android operating system. And if the Chinese government decides to permanently block access to Google.hk, it could spell the end of any advertising revenue for the site.

China has more Web users than America has people, and unlike the U.S., where Internet use is ubiquitous, most of China's 1.3 billion people aren't online - yet.

Eventually, China could be an extremely lucrative market; by not playing nice with Chinese authorities, Google could wind up being shut out of billions of dollars of revenue.

But that's a risk that - I think - is worth taking for a company that prides itself on not doing evil.
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