Does Google Need China?


MP Guru
On Tuesday, Google announced it would postpone the release of two Android phones in China following last week’s fracas between the search engine giant and Beijing. According to reports from Google, its security infrastructure underwent cyber attacks and theft, and the Gmail accounts of human rights activists had been hacked. In response, the company said it may withdraw its operations from the country. But how badly does it need China?

More than it might appear. The fact that the company is continuing to negotiate with Chinese authorities suggests that it places a high value on Chinese customers, Professor Brett Gordon says.

“I think Google does need China. One day China will be an enormously large portion of the Internet,” he says, “and it’s impossible for a company like Google to ignore more than one billion potential users.”

Gordon points to the history of Internet usage in the United States, which has grown quickly since it entered mainstream usage in the mid 1990s. The adoption of new technologies moves even more quickly in developing markets, he says. China’s stats appear to prove that point: the number of Internet users in China grew more than 28 percent from 2008 to 2009 for a total of 384 million last year, making it the largest group of Internet users in the world. And that figure is poised to grow higher given the country’s population of roughly 1.3 billion people.

Currently, Google’s market share in China is about 33 percent, with China’s dominating the market. “To support U.S. business in China,“ Gordon says, ”you would rather that Google be there than not. There is no reason that Baidu won’t become as large or larger than Google.”

The tension between Google and Beijing also points to fault lines around regulation of the Internet is as it grows internationally. “So far the Internet has been very strongly centered in the United States. As more emerging economies continue to grow, and given their large populations, the Internet will slowly keep shifting toward the largest user base and largest revenue base,” Gordon says. “But to try and police that through an international organization is very hard to do. Companies will simply have to decide between making a political point or a profit.”

Photo credit: Josh Chin