How much could Google lose in China?
Google’s stand on censorship in China, namely that they will no longer censor search results in that basically authoritarian country, has the potential to cost the company big dollars, but how much?
The Chinese government has never been exactly thrilled with being brought up short in public, and Google has just done that. In essence, though in polite words, Google has told the government of China that they will no longer censor search results on Google.cn. That is a rare thing for a business to do, knowing that the reaction of the Chinese government will not fall within the sphere of “live and let live.” Is there a way to calculate what may actually be at risk for Google?
The answer may be that Google is taking a chance of having to abandon the largest single technological marketplace in the world, according to a CNET article. At this point in the tech development process in China, they already have the largest number of Internet users in the world: 338 million. Yet, astonishingly, only 25 percent of China’s citizens are currently hooked up to the Web. That means that there is the potential for an additional 1 billion Google users in China. No matter how you look at it, a billion people is a lot to walk away from, though ethics would seem to dictate that walking away is the proper course of action in this case.
Google has said that its revenue from Chinese operations is “truly immaterial.” However, Piper Jaffray’s Gene Munster does not look at it that way. Munster says “As a sensitivity to next year’s growth, if Google China ceased to operate as of Q2, our 2010 [year over year] revenue growth estimates would go to 17 percent from 18.4 percent.” When you are the size of Google, 1.4 percent of revenue is a lot of money, and that does not begin to consider future growth. Google will be entering into talks with the Chinese government soon to discuss this issue. One cannot help but hope China backs down, but that does not seem very likely.
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January 17th, 2010
Much will depend on the pressure the US government applies. If the US pushes for an uncensored internet, the Chinese government, who may have been willing to make a little compromise, will be coerced by Chinese nationalists to refuse what they see as direct foreign meddling of their government.
It would not be the first time the Chinese government was compelled to take action due to nationalistic fury…