Google threatening to leave China

Some say attack allegation distracts from Google's struggle

BEIJING -- Google said Wednesday that it will no longer accept China's censorship of its Internet searches and may close its China operations after discovering a cyber attack designed to access the e-mail of Chinese human rights activists.

Some called the alleged cyber attack a distraction from Google's struggle to secure a larger share of China's estimated 20 billion yuan ($2.9 billion) annual online advertising market -- now composed of about 340 million Chinese Web users.

But the California-based company said it was putting its foot down and taking "A new approach to China," in a blog post Tuesday, because the cyber attack goes "to the heart of a much bigger global debate about freedom of speech."

Google said the company had detected a "highly sophisticated and targeted attack on our corporate infrastructure originating from China." Google did not directly accuse the Chinese government, with which it expects to negotiate again soon.

But because of the attack, because of censorship of Google.cn search results from its launch in 2006, and because Google's video sharing site YouTube has been blocked here since March, Google will "review the feasibility of our business operations in China," David Drummond, chief legal officer, said in a statement.

"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China," Drummond said.

In 2009, Google captured about 31% of China's Internet search market, according to Beijing-based research firm Analysys, whose data showed roughly 64% was controlled by local rival Baidu.com.

"Based on past experience, I don’t think Google's 'new approach to China' will give near-term positive results with the relevant authorities," Edward Yu, Analysys president said by telephone.

China's gross online advertising expenditure is expected to grow 25% in 2010 to reach 25 billion yuan ($3.7 billion), Yu said.

China's online advertising revenue is split largely by the major search engines Baidu and Google, by the major Web portals Sina, Netease and Sohu, and by a handful of advertising agencies.

Some advertising experts question whether Google -- which employs 700 people in China, compared with 6,300 at Baidu -- has the infrastructure to execute an advertising-supported search engine in a country where business often depends on face-to-face relationships.

"I suspect Google's fundamental problem in China is its business model," Tom Doctoroff, U.S. advertising giant JWT's Shanghai-based Greater China CEO said by telephone.

China's Web surfers are spending online, but not on sites advertising on search engines,  rather on eBay-like sites such as Taobao.com, which is expected to report its 2009 revenue doubled to 500 million yuan ($58.6 million).

"For a lot of Chinese advertisers, leaping into the unknown is a very scary thing unless there's a lot of handholding," Doctoroff said. "Google's model is a bit of a build-it-and-they-will-come mentality, but their problem is last-mile connectivity."

For those more focused one of Google's official mottos -- "don't be evil" -- than on its bottom line, the company's statement sounded like a shot at Beijing censors, who keep a tight rein on the flow of information they deem a challenge to one-party power.

"This is a wake-up call to the international community about the real risks of doing business in China, especially in the information communications technology industry -- an industry that is essential to the protection of freedom of expression and privacy rights," Sharon Hom, Human Rights in China executive director said in a statement.

Google's previous cooperation with Chinese authorities determined that Internet searches for politically sensitive terms turn up only selected, censor-approved results inside China.

On Wednesday, a Google.cn search for the name of Tibet's exiled spiritual leader, the Dalai Lama, turned up fewer error messages than usual, suggesting that censors temporarily relaxed their grip.

In 2005, human rights activists called Internet rival Yahoo a police informant for giving the Chinese government e-mail account information belonging to a Chinese journalist, who was later jailed for 10 years for revealing state secrets. The Yahoo brand is now owned and operated by the Alibaba.com Group in China.
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