January 14, 2010 / 2:04 PM / in 8 years

Little future for Google in China without search

SAN FRANCISCO/SHANGHAI (Reuters) - Google Inc, involved in high-stakes brinkmanship with the Chinese government, might still seek ways to market other products in the country even if it quits its China search business.

But without search, its most important business in China, the technology giant would struggle to retain a foothold in the world’s biggest Internet market by users, said analysts.

Google said on Tuesday it was no longer willing to censor search in China through its Chinese-language website Google.cn, putting it squarely at odds with the Chinese government, which has banned Twitter, Facebook and YouTube.

China, which prizes political stability and control, has since robustly defended its use of censorship online and is unlikely to yield to Google’s requests to run an uncensored search engine within their borders, analysts said.

“We believe that the Chinese government and Google will not be able to easily (reach a) compromise,” said UBS analyst Wang Jinjin in a research note.

Google currently offers Google Maps, Gmail and free music downloads to Chinese users, all of which could be in jeopardy if the company walks.

The most promising non-search area of business for Google, said analysts, is its Android platform, an open source mobile operating system, already adopted by China Mobile’s OPhone and Dell’s Mini 3, which was launched in China late last year.

But even this product could stall if Google were to no longer offer its most popular services.

“Android ... has potential but if it offers any of the Google services like Gmail or search then it may have a problems once Google leaves,” said iResearch analyst Hao Jun Bo.

Other Google products hold even less promise in China’s tightly controlled online market. Those include Google Voice and Google Books, a searchable digital library comprising millions of scanned books.

Google Voice, a service that allows users to place calls over the Internet, would likely encounter similar difficulties to those seen by Internet firm Skype, which offers a similar service. The free version of Skype is often blocked by government censors and a special version is monitored by Chinese authorities.

Google Books faces other difficulties, including legal challenges.

Last October a group of Chinese authors accused Google of infringing their copyrights by scanning their works into the Google Books library.

Google has since issued an apology for the lack of communication.


Google, which competes with Baidu Inc in China’s $1 billion search market with over 360 million users, has said it views China as an important market.

The firm, which fought communication companies to crack open the wireless phone market and in the end opted to partner with some incumbent wireless firms rather than to go it alone, has a pragmatic streak.

This leaves open the possibility that Google and Beijing could reach a compromise that involves censorship, but not by Google itself.

Under this scenario, the government would censor through its own firewall, but Google would not directly censor results on Google.cn, said Stanford University Graduate School of Business Professor Haim Mendelson.

While Mendelson said he thought it was more likely Google would leave China, he said a compromise could give both sides something they want.

China wants to maintain its image at home and abroad, and being rebuffed by Google does not help.

“Google has some interest in maintaining a presence in China, and the Chinese government has an interest as well,” said Mendelson.

“The Chinese government wants to project an image of the country where they do want U.S. companies to be present.”

Additional reporting by Joanne Chiu, Editing by Don Durfee and David Cowell

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