China Says No to Google Search, Yes to Google Business (Updated)
Visitors to China's number one web portal, Sina, can still find the Google (GOOG) search bar front and center on their homepage. But the Chinese government has now issued a warning to local firms, urging them to drop Google search if an agreement is not reached on censoring results. It's a clear signal that the dealings between the world's biggest search engine and the world's biggest search market have soured. The question that remains is how Google's other business in China, advertising and mobile, will be affected.
For a brief moment it appeared that the two parties would reconcile. Google began hiring again at its Beijing offices and advertising customers who had fled following the initial spat flocked back to Google. But on Friday China's minister of industry and information technology, Li Yizhong, condemned Google:
If you want to do something that disobeys Chinese law and regulations, you are unfriendly, you are irresponsible and you will have to bear the consequences.Sources inside Google say the company is now virtually certain to shutter its China based search engine.
The company will try to continue building its share of the Chinese market for advertising and mobile, but the recent edict has had a chilling impact. Ad buyers are encouraging their clients to switch from Google to its state sponsored rival Baidu. Major players like Sina have stated they will only stay with Google if the company remains in country, and have backup partnerships in place if the search giant is banned.
Experts believe Google also stands to lose its toehold in China's booming mobile phone market. Google search is currently available on China Mobile, the world's most valuable phone company. But the government made it clear that this kind of cooperation will not be tolerated, and in January Google ditched plants to introduce Android handsets to the Chinese market.
While condemning search, however, Minister Yizhong encouraged Google to continue to do business in China. "If you don't leave, China will welcome that; if you don't leave, it will be beneficial for the development of the Internet in China." It's strange praise, couched in the negative, that highlights their fraught relationship. Google and China may not see eye to eye on freedom of search, or speech, but they have always agreed on the benefits of business.
Update: According to the WSJ, Google's Chinese partners have written them an impassioned plea, begging to know how they will be compensated if the search giant pulls out of China. The message, from 27 firms that sell Google ads to Chinese businesses, makes it clear that customers are spooked and ad sales are cratering in anticipation of an exit.