Google's Move Out of China

For years the elephant in the room for Google is how it can stick to its motto of "do no evil" and continue to censor its search engine in China. In Jan. of this year at its annual shareholders meeting Google announced that it will stop censorship in China even if it means they will have to pull out of the Chinese market. This triggered numerous back and forth very public statements by both Google and the Chinese government that resulted in deteriorating relations and Google ultimately (earlier this week) pulling out of China and directing traffic to its Hong Kong site.

For Google, it believes that its search engine was not competing effectively (around 30% market share) with Baidu.com (the Chinese counterpart). By pulling out of China, Google can appease its humanitarian conscious shareholders and focus on better performing markets.

However, feeling that they have lost face, the Chinese government is obviously very unhappy and have gone on the offensive. Under government pressure, Chinese mobile providers have cancelled deals with Google where Google was going to be provide mobile search functions in China and is cautious in selling mobile phones with the Google Android operating system. The second of these consequences may have a huge impact on Google. China is the worlds largest cell phone market and Google has a substantial market share. If it looses the cell phone market in China, Google will face many more issues.

Ultimately, Google can not stay out of China for long. In the long-term, whether for its search engine or mobile phone programs, Google will eventually need to tap into the Chinese market to compete successfully.