Google has said it may pull out of the Chinese search engine market following a “highly sophisticated and targeted attack” on its network.
Speaking on the company’s official blog, Google’s Chief Legal Officer David Drummond said that the severity of the attack, which targeted the Gmail accounts of Chinese human rights activists, meant Google had decided to review its position in the country.
Despite concerns over censorship and human rights abuses, Google has operated in China since 2006 but has failed to dominate the market; with approx. 13% of the market it trails fair behind local market leader Baidu, which accounts for over 77% of searches.
Google’s potential withdrawal from the market is significant; at almost 350m users China’s internet population is the largest in the world and is still growing quickly. In December 2009 Microsoft (which has only a very small presence in China) declared that China was “the most important strategic market”.
Share price falls
The potential worth of the Chinese market means not being part of it could impact future revenues. News of a possible pull-out saw Google’s shares fall 0.57%, while Baidu’s value was up 13%.
Reaction to Google’s announcement and its motivations was mixed; a statement from Baidu claimed that the move was financially, rather than politically, motivated; with the withdrawal due to a failure to compete or make money in China.
Elsewhere, security firm F-Secure questioned how unusual or out of the ordinary the attack was:
“This wasn’t in my opinion ground-breaking as an attack. We see this fairly regularly. said Mikko Hypponen, of F-Secure. “Most companies just never go public.”
Pull-out a mistake
The general consensus amongst industry experts appears to be that the move is ultimately misguided and will have a negative effect on Google’s long-term revenues.
“This is the most stupid decision in their history,” commented Tang Jun, a former president of Microsoft China. “Giving up China means giving up half of the world.”
In response to Google’s announcement the Chinese government said that foreign internet businesses were welcome to operate in China, provided their actions were “according to the law”, signalling that Google will not be allowed to run its search engine without fiters. The government also emphasised that the Chinese law “proscribes any form of hacking activity.”