X
    Categories: LauraPositioning

Why Google should get out of China

   

    Sometimes
the most illogical business decision is the right decision for the brand. This
is certainly the case for Google.

    Google
is pulling its company out of China, the biggest internet market in the world.

    Sounds
illogical and crazy to me and most leaders. But it is the right call for
several reasons.

 

1. Google wasn’t winning in China anyway.

    Google
is the most popular search engine in the world and dominates the market in most
countries, except China.

    Why
is that? It’s simple, Google was late.

    Google
only entered the Chinese market in 2006. Even a brand as powerful as Google is
at a huge disadvantage if it isn’t first. Baidu was the first search engine in
China and it is seen as the real thing in search with over 77% marketshare. By
contrast Google has only around a 12% share.

    Of
course, even a small share in a county like China adds up to a lot of users.
China has the world’s largest online population with over 300 million people
using the Internet, a figure that is expected to soon exceed the entire U.S.
population.

    Google
has had success with one part of the Chinese market; younger and more educated Chinese
users tend to prefer Google. But Google has not succeeded in getting the
general Chinese population on board.

    Google
also is losing in Russia to a brand called “Yandex,” in South Korea to a brand
called “Naver.” And in Japan to Yahoo. In all three countries, Google wasn’t
first.

 

2. Google has a flag to carry. And is getting a lot of
PR.

    Google
equals “search” in the minds of consumers across the world. But what does “search”
really mean? The dictionary definition of search is “the activity of looking thoroughly
in order to find something.” You ask Google to search for something and it
does. Google searches for it, finds it and delivers it to you.

    It
does that everywhere except in China of course. In China the government censors
information. In China most internet users can’t even access this blog. It is
crazy, scary yet true.

    In
most of the world, the value of freedom of information is highly regarded.
Probably in no place more so than the United States of America. Freedom, democracy
and free markets are our core values.

    China
has realized the power of free markets and since opening up its economy has
seen great rewards. But information is not free at all in China.

    As a
company focused on search, it is in Google’s best interest to fight for freedom
of information around the world. The media has certainly rewarded Google’s fight
with China with a massive amount of media coverage. There have been multiple
front-page stories in the Wall Street Journal, New York Times and many other
publications around the world.

 

3. Freedom will eventually win.

    Google
is picking the “freedom” side in this fight. In the short term, Google is going
to suffer a loss of sales. But in the long term, Google is strengthening its
focus on search and freedom. Around the world most people respect the idea that
the Internet should be a place of freedom of information. Access to information
should not be filtered by any government or any group.

    Because
of its stand in China, Google benefits now in other markets. And if history repeats
itself, freedom of information will eventually come to China. When that happens
Google will be ready to claim itself the real search engine.

 

4. Age doesn’t always equal wisdom.

    According
to the Wall Street Journal, Google’s decision to leave the Chinese market involved
a heated debate with CEO Eric Schmidt in favor of staying and the two young
co-founders of the company, Larry Page and Sergey Brin, in favor of saying “zai jian,” Chinese for goodbye.

    Don’t
tell my father, but sometimes kids are right. Schmidt was probably looking at
the numbers while Larry and Sergey were looking at the message. Pulling out
means losing millions but it also says what Google is willing to fight for.

    Sometimes
the best decision for a company to make is based on gut instincts rather than
spreadsheets.

    Sure,
Google will lose a few dollars in the short term, estimates say up to $600
million in lost sales.

    But
in the long term, standing up against censorship and promoting freedom of information
will likely bring great rewards in the hearts and minds of the world.

Laura Ries :

View Comments (14)

  • Baidu is a ripoff of Google anyway. Google was SOL because of the lack of intellectual copyright in China. I find this as a red flag for all of those who have pointed to the "modernization" of China. Talk about a front. Fancy tech does not always indicate that society has advanced in all respects. Google made the right move.

  • Hi Laura,
    Good post yet I am curious to know how Google is the first in every other market that you mentioned? Before Google there was Yahoo, before Yahoo there was Altavista. The list goes on.
    Trout-Ries' first-to-the-category does not work in online world, where memory span is much shorter.
    Other than that, good post. I support Google's decision.
    Gunter Soydanbay
    Brand Strategy Consultant
    http://www.soydanbay.com

  • For the sake of freedom maybe Ries & Ries should leave China as well and open a west coast location in Scottsdale...just a thought.

  • There is a distinction between search engines and directories. In the minds of the consumer, Google was never 1st when it came to finding information on the internet. There were lots of directories before Google (Alta Vista/Yahoo!). Google was first to stick strictly to searches in a format that was clean, uncluttered and highly focused. In this sense, Google can be said to have been a new product category for the internet, and the first of its kind in many places.
    I think the analysis is correct. In particular, Google embraces a "do no evil" mission statement. Pulling out of China on ethical grounds would be a windfall to the Google brand here in the states and elsewhere. Though, that move doesn't make much short term business sense.

  • Seems like a good decision. I can't believe that google just gets 12% and baidu almost 80%.

  • It is no surprise I would agree with your assessment on this, Laura, but I would not flat out state they were not first without backing up the consumer black box battle, or you will get justifiably clarified by Joshua Payton. The fact is that they are making a Branding statement in China - just like Tylenol did in the 80's - by not being on the shelf. Google can remain top of mind with good PR on its market (i.e. The Internet). In this way, it can be argued that Google has not left the Chinese market actually but have taken a strong defensive position on/with the market. With careful planning and execution, plunging Asian ad revenue does not have to be a foregone conclusion. So, from my perspective, rather than leaving the battle/market, Google is applying the strategic advice of Sun Tsu, to remain out of reach from the larger opponent to engage in guerilla hit and run (no pun intended). It is a wise move for long-term company prospects and short term negative financial impacts can be contained.
    As Soydanbay points out, in a great many ways, The Internet is a physical market unto itself and not just a medium. It has become the message! That is what Google is banking on and I think they'll come out a winner.
    IMHO, expect increased market share from 12% as an ROI outcome when the dust settles next two quarters (if they execute PR well in mainstream Chinese media).

  • if they are not winning, then they could just transfer to a place where they could be number 1.. :)

  • 阿彌陀佛 無相佈施
    不要吃五辛(葷菜,在古代宗教指的是一些食用後會影響性情、慾望的植
    物,主要有五種葷菜,合稱五葷,佛家與道家所指有異。
    近代則訛稱含有動物性成分的餐飲食物為「葷菜」,事實上這在古代是稱
    之為腥。所謂「葷腥」即這兩類的合稱。 葷菜
    維基百科,自由的百科全書
    (重定向自五辛) 佛家五葷
    在佛家另稱為五辛,五種辛味之菜。根據《楞嚴經》記載,佛家五葷為大
    蒜、小蒜、興渠、慈蔥、茖蔥;五葷生啖增恚,使人易怒;熟食發淫,令
    人多慾。[1]
    《本草備要》註解云:「慈蔥,冬蔥也;茖蔥,山蔥也;興渠,西域菜,云
    即中國之荽。」
    興渠另說為洋蔥。) 肉 蛋 奶?!
    念楞嚴經 *∞窮盡相關 消去無關 證據 時效 念阿彌陀佛往生西方極樂世界
    我想製造自己的行為反作用力
    不婚 不生子女 生生世世不當老師
    log 二0.3010 三0.47710.48 五0.6990 七0.8451 .85
    root 二1.414 1.41 三1.732 1.73五 2.236 2.24七 2.646
    =>十3.16 π∈Q' 一點八1.34

  • It is important for a company to stand by their core values. If Google believes in freedom of information, and China forbids that, then Google is doing the right thing. They have started the movement for freedom of information in China and are slowly pulling out. Such a bold move will draw attention from the public eye. People will respect a company that stands up for what it believes in. I also believe that by standing up for freedom of information, something America values, they will increase their loyalty of American customers and perhaps gain new ones. By sticking to their core beliefs and pulling out of China they may experience the initial loss of income, but in the long run they will be better for it. People will respect Google for this choice as long as it is publicized correctly.
    Brooke
    http://www.moscreative.com/