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On January 13 2010 09:19 mucker wrote:
Google is a public company. They were happy to censor their results and put up with the Chinese government when they thought they could make money there. Most likely this means they aren't making enough money in China to justify staying there and have been looking for a way to pull out but get a public relations win out of it. Though I would imagine fending off the Chinese government's hackers would raise your operating costs quite a bit.
Having a smaller portion of one of the biggest pies in the world is no small thing, and very profitable I imagine. A smaller portion of a bigger pie can, and often is, better than a bigger portion of a smaller pie.
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A lot of people are making excellent points, but for a situation that doesn't accurately describe what's happening in reality. This isn't just about Google not knowing how to do business in China. Anyone from the outside who's studied even a little bit about China knows that things are done a certain way in China. It's not an issue of Google not knowing those things, there's more to it than that.
The cyber attacks are far more significant than most people here are recognizing. Until the government is willing to be more cooperative in regards to such cyber attacks, what else can Google do? They can wine and dine all they want, but that doesn't change the fact that cyber attacks will continue. Google's attempting to make a stand, and although the effort may be futile, they can't really afford to stick around and not do anything either.
You know, most people in China really aren't very aware of the cyber attacks at all, and even the articles linked in here point out that the government is very restrictive about what they're revealing regarding the situation. Which is honestly a shame because that's probably the biggest issue concerning this entire situation, yet so many people (including many here) are not giving it the acknowledgement that it deserves. Whether it's from their own ignorance or simply from not having all of the information, it's something that changes one's perception of the situation entirely. You cannot ignore it and have a relevant discussion about this situation.
That said, this really isn't very surprising at all, because it was obvious all along that the government won't back down or give in to what Google wants. And of course, Google can't simply just stick around and put up with the situation either. It's unfortunate, but at least as I see it, there's not many other alternatives at the moment. But, this is still a very significant event because as various articles have stated, this does set the tone for other foreign companies trying to do business in China, and for those who are willing to pay attention, it also points out the reality of China's participation in cyber attacks and how that will affect business operations.
I think the cultural discussion here is extremely interesting, but unfortunately, it just seems so out of place... This situation just isn't about the cultural differences. They might play a part, but they're really not the main issue here.
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Orlandu,
I absolutely doubt Google is shutting down cause of "gov't attacks". The US gov't tap into domestic phone calls, library records and banking records etc. Do you see any banks saying they are gonna shut down cause its invasion of privacy?
Besides, Google make it sound like 1) they are so sure its the Chinese gov responsible for the attacks, 2) Chinese gov are the ONLY ones that make those attacks. Would you honestly believe that the US gov doesnt spy on Chinese businesses too? The US congress gets intel reports on China like every year. Where you think those numbers come from? And why doesnt Google tell ppl about Chinese gov't official accounts being hacked into by US agents?
Google just ran a failed business and making up lame excuses for themselves. Its already reported that due to Chinese having different online spending habits, Google.cn isnt profitable.
Also, Google's announcement that they will no longer censor search results has absolutely nothing to do with cyber attacks. Its obvious that the Chinese gov't isnt going to change their censorship laws overnight to accommodate Google. So Google is just trying to pull off a PR stunt.
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On March 16 2010 01:03 dybydx wrote:
Google just ran a failed business and making up lame excuses for themselves. Its already reported that due to Chinese having different online spending habits, Google.cn isnt profitable.
Google had 30% of one of the world's largest online markets. That's hardly a failure.
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From a market share perspective, Google is the #2 search engine used in China, but Google was unable to generate profit at the end of the day.
They also launched a music download service much like Apple's iTune Store but its not working out either.
Other Google services and sites like YouTube (also owned by Google) are blocked completely in China.
Google's business model simply didn't work there as it worked elsewhere.
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On March 16 2010 03:06 dybydx wrote:
From a market share perspective, Google is the #2 search engine used in China, but Google was unable to generate profit at the end of the day.
They also launched a music download service much like Apple's iTune Store but its not working out either.
Other Google services and sites like YouTube (also owned by Google) are blocked completely in China.
Google's business model simply didn't work there as it worked elsewhere.
I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches.
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On March 16 2010 03:30 madsweepslol wrote:Show nested quote +On March 16 2010 03:06 dybydx wrote:
From a market share perspective, Google is the #2 search engine used in China, but Google was unable to generate profit at the end of the day.
They also launched a music download service much like Apple's iTune Store but its not working out either.
Other Google services and sites like YouTube (also owned by Google) are blocked completely in China.
Google's business model simply didn't work there as it worked elsewhere. I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches.
I don't think there ever was any irrefutable evidence to say that google never made a profit in China (Certainly none so far from this thread). Any company on the ball should at least break even. I would say that google.cn was doing a little better than break even but definitely not up to the projected potential versus market opportunities.
It would be a little weird to think that a company like google where talent and smart thinking is so valued can not grasp the simple dynamics of doing business in China. It's not exactly rocket science and majority of their Chinese operations are Chinese born residents.
My bet is that the general clash of culture of google's own values and the fact that they can not gain a favourable position versus local entities (who wields superior influences and resources). Maybe to a point where the google executives see it as a pointless operation and one that is better served by shutting it down.
The real issue I would hypothesis is the fact that no foreign own company is allowed dominance in a Chinese sector without partial Chinese control of assets. This isn't exactly new and I think is where google really struggle to come to terms with and this issue could be fatal for a company whose main assets are intellectual property. They got Lee (A respected oversea Chinese, formal microsoft executive) to fix the problem but he failed then he started his own company.
Combine that and the fact that Chinese government would not grant google any sort of favourable policy.
They need someone who can crack the conservative regime. Someone in high places who can protect and guarantee google's interests (namely intellectual properties and against underhand moves to undermine google's endeavours). Both are crucial to gain a foothold in China. But then again there are no free lunch, for anything you take, you must give.
Google's game relies on a non interfering market and openness; both are absent in modern Chinese business.
I for one am glad that google made a stand on this even the little use it did.
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On March 16 2010 03:30 madsweepslol wrote:
I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches.
I got that info from seeking alpha, one of the better known US based sites that discuss investments.
I can't find the link again but here is another one shows Google.cn revenue.
http://seekingalpha.com/article/182429-what-will-it-cost-google-to-leave-china
The original article I read pointed out that Google's revenue model ultimately depended on users to spend money online which is not how the culture works in China, so from a Wall Street prespective, the Google.cn operation was essentially a lost cause.
What ever the case may be, Google simply cant adapt itself to operate in China and its obvious that China isnt going to change laws to adapt to Google, so Google decided to throw in the towel.
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On March 16 2010 09:29 dybydx wrote:Show nested quote +On March 16 2010 03:30 madsweepslol wrote:
I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches. I got that info from seeking alpha, one of the better known US based sites that discuss investments. I can't find the link again but here is another one shows Google.cn revenue. http://seekingalpha.com/article/182429-what-will-it-cost-google-to-leave-chinaThe original article I read pointed out that Google's revenue model ultimately depended on users to spend money online which is not how the culture works in China, so from a Wall Street prespective, the Google.cn operation was essentially a lost cause. What ever the case may be, Google simply cant adapt itself to operate in China and its obvious that China isnt going to change laws to adapt to Google, so Google decided to throw in the towel.
Wow, interesting article. I'm very surprised Google wasn't able to glean more from the largest internet user base in the world. Thanks for posting. ^^
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Can someone explain why Google wouldn't be profitable in China? I know that Chinese people are more conservative in general but would that affect the income generated by ads?
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Probably because consumer habits differ enough that Google can not sell to local business that their ad => increase exposure etc.
That and the fact that google do not dominate search engine traffic in the country meaning that google's traditional strength do not generate profit that's enough to justify continual operations.
Again I find it doubtful that their ad operation alone is losing ground. They have less than 200 employees in China and their business assets are entirely I.P meaning that they do not waste money on local assets. The recent hacking could have provoked a feeling that losing IP to Chinese hackers is more damaging than the money that it make in the country.
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its prolly a combination of factors.
while google may not be loosing tons on google.cn, its obviously not getting Wall-Street-expectation returns, desoite google.cn has about the same user base as US users of google.com. this means google.cn has to have some excellent growth expectation (income-wise) in the future to justify continuing operation.
but... operating a website in the PRC has a lot of regulation. ie, June 4 is "internet maintenance day" that many websites "voluntarily" shut down their forum service. this is just 1 of the peculiar things that happens in China.
i m pretty damn sure hacking alone wasnt their reason to exit. besides, if ur mgmt, you would rather find a scapegoat than admit your own incompetence in improving the company's fortune.
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On March 16 2010 09:29 dybydx wrote:Show nested quote +On March 16 2010 03:30 madsweepslol wrote:
I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches. I got that info from seeking alpha, one of the better known US based sites that discuss investments. I can't find the link again but here is another one shows Google.cn revenue. http://seekingalpha.com/article/182429-what-will-it-cost-google-to-leave-chinaThe original article I read pointed out that Google's revenue model ultimately depended on users to spend money online which is not how the culture works in China, so from a Wall Street prespective, the Google.cn operation was essentially a lost cause. What ever the case may be, Google simply cant adapt itself to operate in China and its obvious that China isnt going to change laws to adapt to Google, so Google decided to throw in the towel.
unless i am mistaken google makes profit the same way every other search engine makes profit, by selling ads. it would be absurd to think that google would simply give up on the largest market in the world because they are currently operating at a loss (assuming they actually do operate at a loss).
you've made a lot of assumptions in this thread that you do not backup at all such as google china operating at a loss.
On March 16 2010 06:06 haduken wrote:Show nested quote +On March 16 2010 03:30 madsweepslol wrote:On March 16 2010 03:06 dybydx wrote:
From a market share perspective, Google is the #2 search engine used in China, but Google was unable to generate profit at the end of the day.
They also launched a music download service much like Apple's iTune Store but its not working out either.
Other Google services and sites like YouTube (also owned by Google) are blocked completely in China.
Google's business model simply didn't work there as it worked elsewhere. I'd be interested in knowing why they weren't able to make a profit since their main income comes from the ads shown with every search, and as the #2 player in a very large market that's a lot of searches. I don't think there ever was any irrefutable evidence to say that google never made a profit in China (Certainly none so far from this thread). Any company on the ball should at least break even. I would say that google.cn was doing a little better than break even but definitely not up to the projected potential versus market opportunities.
it hasn't been proven that google.cn was operating at a loss either. it would be nice to see a source for this which i don't think is possible entirely possible unless google themselves come out and say it.
oh hey look at this: http://www.chinatechnews.com/2009/01/07/8428-google-china-made-cny973-million-revenue-in-first-three-quarters-of-2008
This is the first ever-published operating revenue of Google China, though it comes via a third party. The report says that the overall scale of China's search engine market was CNY4.664 billion in the same period, a year-on-year increase of 75.8%. The Chinese search engine provider Baidu.com, along with Google China, still dominated the Chinese search engine market.
In regards to revenue, Baidu made CNY2.275 billion in the first three quarters of 2008.
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mahnini,
the figure still proves that google.cn isnt improving google's fortune by much, if at all. despite there are 384M of Chinese internet users vs 227M in USA.
you have to see this from a wall-street perspective. they run a business for money. when was the last time you heard a big business on wall-street shut down because of ethical concerns? certainly didnt happen with AIG, Goldman Sachs, Citi or any of the Big Oil companies? Microsoft is even notorious for their business practice.
wall-street business doesnt shutdown for human rights reasons, they do so for the bottom line.
[in related news, google.cn's exec, Lee, left google in sep 2009. it was known at the time relations between google and the PRC gov was "bad".]
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On March 19 2010 01:15 dybydx wrote:
mahnini,
the figure still proves that google.cn isnt improving google's fortune by much, if at all. despite there are 384M of Chinese internet users vs 227M in USA.
you have to see this from a wall-street perspective. they run a business for money. when was the last time you heard a big business on wall-street shut down because of ethical concerns? certainly didnt happen with AIG, Goldman Sachs, Citi or any of the Big Oil companies? Microsoft is even notorious for their business practice.
wall-street business doesnt shutdown for human rights reasons, they do so for the bottom line.
[in related news, google.cn's exec, Lee, left google in sep 2009. it was known at the time relations between google and the PRC gov was "bad".]
you are basing your arguments on large assumptions again.
your argument is that google is pulling out of china because they cannot succeed when the nytimes article says they have 30% market share. regardless of whether they are making profit or not, packing up and leaving when you have 30% of the world's largest market doesn't make a whole lot of sense from any perspective. google has tons of operations that can absorb that cost easily if need be anyway. there may be other factors affecting this decision but i dont think google not knowing how to run a business is one of them.
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Canada9720 Posts
google update: http://googleblog.blogspot.com/2010/03/new-approach-to-china-update.html
So earlier today we stopped censoring our search services—Google Search, Google News, and Google Images—on Google.cn. Users visiting Google.cn are now being redirected to Google.com.hk, where we are offering uncensored search in simplified Chinese, specifically designed for users in mainland China and delivered via our servers in Hong Kong.
emphasis mine
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Hmmm? The government will respond soon if Google actually decided to remove the search censors.
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you're still not saying anything at all. google makes less in china than it does in the rest of the world. so what? i don't know where 20B comes from but i'm guess that isn't revenue within a quarter and even if it is, revenue does not equal profits. having problem with government policies is far different from what you were insinuated which was that google didn't know what it was getting itself into in terms of market strategy which is highly unlikely. a case could be made but you aren't really making a good one.
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EPT
