Google China Partners Want Compenation If Search Firm Leaves

If Google (GOOG) closes its Google.cn Chinese search portal, it will be tough luck for the American company which looked forward to getting an increasing shares of its revenue from the People’s Republic’s 400 million internet users. It is also tough luck for Google’s partners, most of which use the Google search feature on their sites.
Several companies that sell advertising for Google in China have expressed their concerns to the central government but they have also warned Google that they may try to get financial compensation from it for loses to their investors and clients. It is an odd request since Google’s trouble in the world’s most populous nation began when its servers were hacked. Google can argue that none of its data is safe so long as it keeps Google.cn open and operates its email service in China.

Google’s partners will make the case that its withdrawal from China was a willful act on Google’s part and unnecessary. That may be to some extent true. Google could continue to censor its results and the Chinese government would almost certainly allow it to stay. Google’s partners would contend that the company did not need to leave China either.

There may be no morals clause in Google’s agreement with its Chinese partners, nothing that says that Google will always be good and will fight evil wherever it is found. So, Google may take the high ground with two financial risks–one to its revenue in China and one due to losses to partners because of its actions.  But, if Google leaves the mainland of its own accord it is likely to swallow hard and pay what may be a higher price for its actions than it expected at first. It is the cost of being morally better than everyone else.

Douglas A. McIntyre