Google Knuckles Under In China

“Hello, I must be going. I cannot stay, I came to say I must be going. I’m glad I came but just the same I must be going.”–“Hello, I Must Be Going” lyrics by Groucho Marx.

Google (NASDAQ:GOOG), just days after its threat to leave China, now says it will not be out of the world’s largest internet market. At least not anytime soon. Instead, it is negotiating with the Chinese government, a government composed of people who are specialists at not negotiating.

Google is certain that the Chinese government, or people working for the government, hacked into its service particularly it e-mail files. Initial reports were that Google would leave China almost immediately after it informed the People’s Republic government that it would no longer censor its search results. China has made it clear to all search engines operating in its market that they must block results that are critical of the government including references about controversial incidents like Tiananmen Square.

Google cannot win a negotiation with the government because the government has almost nothing to lose if Google leaves. There are a number of search engines used in China, including home-grown Baidu (BIDU), Yahoo! (YHOO), and Microsoft’s (MSFT) Bing. One more or less will not greatly alter the ability of the Chinese to search the web.

Reuters points out that Google’s relationships with the Chinese government and local advertisers may have already been damaged by the search company’s attack on the central government.

Now, a few days after its initial threat, Google may have changed its mind. It may believe that it cannot afford to leave the world’s largest internet market. Any “negotiations” will get the American company very little. It will have to give in the Chinese censorship demands if it wants to stay. And, Google will have knuckled under.

Douglas A. McIntyre