Google Makes Good on China Threat

After months of negotiations with Chinese officials, Google has stopped censoring its search and news results in China and started redirecting local users to its Hong Kong site.

The move comes after more than two months of tense negotiations with the Chinese government over a series of cyber attacks on its corporate infrastructure, which Google said originated from within the country.

In a Google corporate blog post, David Drummond, the company’s chief legal officer, said the company’s Hong Kong site is offering “uncensored search in simplified Chinese, specifically designed for users in mainland China and delivered via our servers in Hong Kong.”

He added: “We want as many people in the world as possible to have access to our services, including users in mainland China, yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement.” (Read the full post.)

Reaction to the decision from government officials has been harsh.

Google has “violated its written promise” and is “totally wrong” to stop censoring its Chinese language searching results, a government official said via state news service Xinhua.

“This is totally wrong. We’re uncompromisingly opposed to the politicization of commercial issues and express our discontent and indignation to Google for its unreasonable accusations and conducts,” the official said.

Businessweek is reporting that Tom.com, majority owned by Hong Kong billionaire Li Ka-shing, has now stopped using Google’s search engine. Its Web site is today carrying Baidu‘s search tools.

Google holds approximately 36 percent of China’s search advertising market, second to Baidu, which has about 58 percent.

Industry pundits said Google is likely to suffer as a result of its decision.

Antony Yiu, managing director of iPropsect Hong Kong and regional search director for North Asia, said Google’s search marketing business could decline.

“You will see some shift of advertising budget originally assigned to Google to be moved to Baidu. I can also see that other home-grown search engines such as Sougu and Soso will step up their advertising sales efforts to attract new advertisers,” he said.

“I am more interested in see whether Bing can capture [some market share] … because of its aggressive expansion in China and its official statement from Microsoft yesterday to set them apart from Google’s viewpoint,” he added. (Microsoft has consistently said that Bing would continue doing business in China.)

In the short term, Yiu argued that Baidu would gain, along with niche portals such as travel-related sites that have a specific targeted audience.

However, advertisers are likely to be faced with higher CPC (cost per click) and lower return-on-advertising spend on Baidu since more advertisers will be bidding on the same keywords and are willing to pay a higher price to appear on top.

Marketing Magazine Asia