Riding on a dragon’s tail is never easy, as internet giant Google discovered in its roller coaster ride since January. Arch rival Yahoo says the China controversy may perhaps not affect Google’s projected annual turnover of $28 billion very significantly but has caused its share price to plummet by 30% which means a loss of billions of dollars in market capitalization.
When phishing attacks from mainland China broke into several gmail accounts of activists involved in humanitarian efforts, in January, Google retaliated to escalate the issue by announcing the removal of censorship in Google cn. Though this increased Google’s image back home, considering that rival Facebook has been playing cosy with companies like BP and Nestle against activist movements, it caused more such attacks.
As the confrontation escalated Google closed its Chinese search engine site in March this year and directed search from its Hong Kong operations. This caused an exodus of executives from Google cn and Google research centres in China to its Chinese competitor Baidu which has a bigger market share among the 400 million internet users of China. Besides it lost several hundred adsense partners, which were ensuring revenue to the internet giant from mainland China.
Google also has a major interest in the Chinese mobile phone market which is both the largest and the fastest growing market in the world. China Mobile has released smart phones using Android operations that have the potential of becoming extremely popular with the tech savvy Chinese youth. This market alone is estimated to be worth several billion dollars as of today and is rapidly growing at a pace over 20% annually.
Whereas Google was operating part of its services through Hong Kong without censorship since March, it was obliged to renew its Chinese ICP licence by June. Over 20 companies had applied for renewal of internet licence whose last date was Wednesday and Google for some reason chose to play the waiting game and applied at the last moment. This after Chinese officials made it clear that it was clearly unhappy to the usage of Google.hk redirect services that the internet giant had been using since the last three months.
Realising that its late application for ICP licence renewal in China could cause a temporary blip in services, David Drummond Chief legal Officer from Google wrote in the Google blog earlier this week “Without a licence we cannot operate a commercial website like Google.cn, so Google effectively would go dark in China.” China still has not approved Google’s application though the official news agency Xinhua reported that the Google application was received late and under consideration.
Whereas it is in the interest of both parties to sort out this controversy, Google stands more to lose because it is a business organisation which will move away from the world’s fastest growing market giving Baidu and other search engines a chance to fill the void. On the other hand the dragon is an old battle hardened fire spitting street fighter which has been through many international boycotts and will not be unduly concerned by the barbs that Google can put in its way today.
I love to write on anything and everything under the sun from Project Management to Poetry, Economics to Travel and Technology. But most of all I love to write about our planet earth, about which you can read more in my blog Ecology to Economics. You may also meet me at http://www.twitter.com/ecothrust
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