UPDATE: A Google Spokesperson just emailed me this: “This is not about market share. While our revenues from China are really immaterial, we did just have our best ever quarter [in China].”
Techcrunch’s Japan writer, Serkan Toto, tweeted at me tonight: “Astonished about how some people, i.e. @scobleizer, idolize Google now. What did G do in the past 4 years in CH besides playing along?”
Randy Holloway, who works at Microsoft, tweets: “You are a good guy, but you have lost your mind today. Ever think that Google is pulling out of China because they are *losing*?”
UPDATE: While I was writing this post, TechCrunch ran a post that said it was about business (and made the point that Google did this because it was losing again).
I think both questions are legitimate (albeit misguided) and they aren’t the only ones asking.
First, let’s take on the question of Google losing in China. I think this is an overly-cynical take (I stole that line from Danny Sullivan, search expert, who said the same thing).
Why is it too cynical? Because, well, if that was how business decisions got done than Microsoft would have pulled out of the search business long ago. But, seriously, to answer that you need to go and visit China, as I have. China is a HUGE market. In 20 years it’ll be much bigger than our own in the United States. Their people are getting online in HUGE numbers. So, to give up on this market now just doesn’t make sense.
Also, Google, and most other tech companies, have many employees there who develop features for the US market. I saw this first hand when I worked at Microsoft. Many of the coolest features inside Windows and Office were developed in China. So, to pull out of the Chinese market, even if you are a losing business concern there (Google was not, even though it was coming in #2 behind Baidu) doesn’t make sense at all because you’d have to give up these employees, many of which are smarter and work far cheaper than engineers in USA (when I visited China last year a HIGH END engineer was paid about $25,000 US per year, compare to a high end engineer in Redmond who usually gets paid $200,000 or more).
Pulling this move in China actually strengthens Google’s competitors (Microsoft, Yahoo, Apple, et al). Why? Because over in China EVERYTHING is done with government support. Every factory I visited was assisted by the government and approved. If Google falls out of favor with the government, it won’t get the best employees, won’t get approvals for offices, will get blocked even more frequently than it is today (how do you think Baidu got so big, anyway? You think they are actually more innovative? Yeah, right. More on that in a future post).
Not to mention that the best supply chains in the world are in China. Translated to English: that’s where the Google Nexus One phone was made (and the hard drives that Google uses, etc etc).
Google has EVERY INCENTIVE to kiss Chinese ass. That’s why this move today impressed me so much.
Now, onto the other point, that Google hasn’t done much up to now to fight Chinese censors and other human rights issues. Um, I’m sorry, but when I visited China I heard from many people that of the American companies Google didn’t play the game as well as, say, Yahoo or Microsoft. Remember Yahoo? Remember what they turned over to the Chinese government? When I worked at Microsoft I saw them play footsie with the Chinese government too. Heck, the Chinese president visited Microsoft’s campus when I worked there and got a red-carpet welcome. Why? Because China is a HUGE market and a HUGE supplier of labor that builds Microsoft’s products.
It doesn’t matter to me that Google played footsie up until today, either. They were the first to stop playing footsie and THAT deserves a HUGE round of applause.
UPDATE: VodPod’s CEO, Mark Hall made quite a few good points in his post about Google and China.