SYRACUSE UNIVERSITYGoogle China  Assignment 5     Manan Kakkar       2/26/2012
IST 755: Google China                                                                                                     ...
IST 755: Google China                                                                                    2Manan KakkarLook...
IST 755: Google China                                                                                    3Manan Kakkar2005...
IST 755: Google China                                                                                    4Manan KakkarTo s...
IST 755: Google China                                                                                       5Manan KakkarB...
IST 755: Google China                                                                                  6Manan KakkarQuelch...
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Google China case study

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A case study on Google China for a class assignment.

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Google China case study

  1. 1. SYRACUSE UNIVERSITYGoogle China Assignment 5 Manan Kakkar 2/26/2012
  2. 2. IST 755: Google China 1Manan KakkarTable of ContentsLooking Back ................................................................................................................................................. 2 For and against entering China ................................................................................................................. 2 2005 Mistakes ........................................................................................................................................... 3The 2010 saga and key factors to exit China ................................................................................................ 3Into the future............................................................................................................................................... 4
  3. 3. IST 755: Google China 2Manan KakkarLooking BackIn an attempt to capture the global market, Google introduced a Chinese version of Google.com in 2000.A translation of the US version, users from within China were provided results that took quite a while toappear. Around the same time, the Chinese government was developing an Internet infrastructure thatlet them control the flow of information.For and against entering ChinaIn 2005, at a board meeting Google decided that it was time they entered China with a local version ofGoogle, hosted within China. Then Google CEO, Eric Schmidt, and Asia-Pacific VP, Sukhinder SinghCassidy made a strong case for a google.cn.In a July 2005 report by the China Internet Network Information Center (CNNIC), the country had 103Million Internet users (CNNIC, 2005). The number constituted to 11% of the world’s online population.In addition to the considerably high number of Internet users (for 2005), surveys showed that nearly38% of the online population used the Internet to seek information. And 58% used search engines(Lawrence, 2009). This roughly comes to 22 Million users who would use a search engine. The numbersand competition in China made a compelling case for Google establish a competent position in thecountry with alarming rates of Internet growth. In addition to using search engines, the survey showedthat users in China were interested in obtaining news from Western sources. Google News, thecompany’s product introduced in 2002 (Bharat, 2006), would have helped the company attract users.Within a year of launching google.cn, the company did not capture any major market. Google was adistant third compared to leader Baidu.com (43.9%) and Yahoo China (21.1%) (Google China SearchRevenue Lags Yahoo, Baidu, 2006). However, looking back, by 2009, Google had more than doubledtheir share and taken the second spot in search market rankings. Google China contributed $300 Millionin revenues and had 31% of the market (Quelch & Jocz, 2010).To summarize, the following were very strong reasons for Google to enter China in 2005: • Rapidly growing Internet population • Nascent search market • End-user’s need for a fast & local search engine • Source of revenues and talentSince their partial entry in 2000, Google had been blocked twice (Lau, 2010). In a 2002 report publishedby the BBC, Google as blocked in China to comply with government regulations on content (Chinablocking Google, 2002). The company was not new to the laws of the land. When the companyintroduced google.cn, they complied with the same laws and restricted access to content that was beingfiltered by the Chinese government on Google.com’s Chinese version. As a result, other than betterperformance, there was little incentive for Google to enter China.
  4. 4. IST 755: Google China 3Manan Kakkar2005 MistakesThe company also failed to understand how the end-user in China was using Internet as a source forinformation. Google’s Asia-Pacific VP, Sukhinder Singh Cassidy pointed out that Google was seen as aforeign company and they needed to change the perception (Lawrence, 2009). In addition to this,Google was not able to offer the same range of products that competitor Baidu had; for example,Instant Messaging and a variety of entertainment services. Baidu on the other hand, had these servicesand attracted more users. To summarize, following are the strategic points Google missed in theiranalysis of China: • Adhering to local laws and restricting access to content • A perception of being a foreign entity and having little local pedigree • Lack of a suite of information, social and entertainment servicesThe 2010 saga and key factors to exit ChinaIn early 2010, reports of cyber-attacks on Google’s web properties surfaced (Girouard, 2010). Theattacks were targeted at Chinese human rights activists (Drummond, 2010). The information andsophistication of the lack led Google to come out strongly against the restrictions laid by the Chinesegovernment. The company hinted at shutting down their operations in China if the censorship was notlifted. The company called the Chinese government’s bluff and on March 22nd redirected all google.cnusers to their uncensored Hong Kong site—google.com.hk (Drummond, A new approach to China: anupdate, 2010). This announcement was met with jubilation by the activists against censorship. Googlebecame their hero and voice against censorship. Morally, Google might have done the right thinghowever, Google is a business. Unfortunately for Google, even by 2010 the company was not able togarner capture considerable market share from competitor Baidu.com. The company’s decision toredirect google.cn traffic to google.com.hk was not acceptable to the Chinese government. Officialsfrom the government made it clear that Google’s license to operate in China will be revoked if theycontinued the redirect. As a result, three months later, on July 9th, Google announced that they will stopthe redirect (Drummond, An update on China, 2010).To summarize, following were the reasons to shut down Google.cn, from Google’s point of view: • Lack of transparency from the Chinese government • Severe content censorshipIn hindsight, Google’s decision to temporarily shut operations in China was poorly timed. With theirInternet Content Provider license coming up for renewal and their lack of market control, the companyhad little leverage against the government. If Google were to shut operations or continue with a protest,as pointed out by, Alexei Oreskovic, Google’s official in China could have been prosecuted (Oreskovic,2010). In addition, Google would have left more than 80 Million users stranded (Quelch & Jocz, 2010)and affected their partners like Samsung, HTC and Motorola who were working on handsets based onGoogle’s Android.
  5. 5. IST 755: Google China 4Manan KakkarTo summarize, here’s why Google’s decision to exit China was poor: • Their license to operate in China was about expire, this meant they had no leverage • The company was not a market leader hence did not command large user support • Google’s decision in abandoning search would have affected their other products and partnersInto the futureChina is an integral part of today’s global economy. For any company to operate in a global environmentthey need to respect the laws of the land. Google’s decision to list all search results and showing adisclaimer that access to the webpage has been restricted by the government is an amicable solution. Itis for the people of China to fight for their rights, and not Google’s responsibility to take lead againstcommunism. Google has announced successful numbers despite being behind Baidu: • 96% of China’s 485 Internet users use Google services (Dan, 2011) • $640 Million revenues in China (Jackson, 2011)Google is a private company and they answer to their shareholders. The success of services likeBaidu.com, Renren, Youku.com, and Sina Weibo are strong cases (Walker & Cook, 2011) that Google cansucceed by working within the frameworks defined by the Chinese government. Google should continueworking on making their products more cohesive, local and targeted for the Chinese users. The companyshould work with the government to find ways to let users in China access to services like YouTube thatare major revenue generators for the company (Lawler, 2010).
  6. 6. IST 755: Google China 5Manan KakkarBibliographyChina blocking Google. (2002, September 2). Retrieved 2 26, 2012, from BBC News: http://news.bbc.co.uk/2/hi/technology/2231101.stmGoogle China Search Revenue Lags Yahoo, Baidu. (2006, July 2007). Retrieved February 26, 2012, from CIO: http://www.cio.com/article/23386/Google_China_Search_Revenue_Lags_Yahoo_BaiduBharat, K. (2006, January 23). And now, News. Retrieved February 26, 2012, from The Official Google Blog: http://googleblog.blogspot.com/2006/01/and-now-news.htmlCNNIC. (2005). 16th Statistical Survey Report on the Internet Development in China.Dan, Z. (2011, September 30). Google claims revenue growth in China despite relatively low market share. Retrieved February 26, 2012, from ZDNet: http://www.zdnet.com/blog/china/google- claims-revenue-growth-in-china-despite-relatively-low-market-share/155Drummond, D. (2010, January 12). A new approach to China. Retrieved February 26, 2012, from The Official Google Blog: http://googleblog.blogspot.com/2010/01/new-approach-to-china.htmlDrummond, D. (2010, march 22). A new approach to China: an update. Retrieved February 26, 2012, from The Official Google Blog: http://googleblog.blogspot.com/2010/03/new-approach-to- china-update.htmlDrummond, D. (2010, June 28). An update on China. Retrieved February 26, 2012, from The Official Google Blog: http://googleblog.blogspot.com/2010/06/update-on-china.htmlGirouard, D. (2010, January 12). Keeping your data safe. Retrieved February 26, 2012, from Official Google Enterprise Blog: http://googleenterprise.blogspot.com/2010/01/keeping-your-data- safe.htmlJackson, E. (2011, December 5). Google Still Does $640 Million In Annual Revenue In China. Retrieved February 26, 2012, from Forbes: http://www.forbes.com/sites/ericjackson/2011/12/05/google- still-does-640-million-in-annual-revenue-in-china/Lau, J. (2010, July 9). A history of Google in China. Retrieved February 26, 2012, from Financial Times: http://www.ft.com/cms/s/0/faf86fbc-0009-11df-8626-00144feabdc0.html#axzz1nXjBTdP4Lawler, R. (2010, March 5). Citi: YouTube to Top $1B in Revenues in 2011. Retrieved Feburary 26, 2012, from GigaOm: http://gigaom.com/video/citi-youtube-to-top-1b-in-revenues-in-2011/Lawrence, A. T. (2009). Google, Inc.: Figuring out to deal with China. In E. R. Mills, The Dark Side (pp. 250-267). Greenleaf Publishing.Oreskovic, A. (2010, Febraury 4). Google facing many risks in China standoff. Retrieved February 26, 2012, from Reuters: http://www.reuters.com/article/2010/02/05/us-google-china-analysis- idUSTRE61408520100205
  7. 7. IST 755: Google China 6Manan KakkarQuelch, J. A., & Jocz, K. E. (2010, January 21). Google in China (A). Harvard Business Review.Walker, C., & Cook, S. (2011, December 27). Chinas Parallel Online Universe. Retrieved February 26, 2012, from The Diplomat: http://the-diplomat.com/2011/12/27/china%E2%80%99s-parallel- online-universe/

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