Google Threatens to Close China Operations


Citing security concerns and a lack of free speech, Google’s chief counsel today made a stunning announcement that the company may cease operations entirely in China if it can’t work out an agreement with the government there to operate an unfiltered site. Google’s (NASDAQ: GOOG) search engine is currently subject to censorship by the government.

“We have decided we are no longer willing to continue censoring our results on, 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,” said David Drummond, Google’s chief legal officer, in a blog post. “We recognize that this may well mean having to shut down, and potentially our offices in China.”

China’s control of online content, which mirrors its broader control of all media, has been a sore point for Washington and many U.S. companies doing business there for years, including Microsoft (NASDAQ: MSFT) and Yahoo (NASDAQ: YHOO).

Drummond’s post indicates the tipping point for the search company was the results of a recent investigation that concluded a number of cyber attacks against the company originated in China.

“We have discovered that at least twenty other large companies from a wide range of businesses — including the Internet, finance, technology, media and chemical sectors — have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities,” he wrote.

As to the specific attacks on Google, Drummond said the company has evidence suggesting a primary goal of the attack was accessing the Google Gmail accounts of Chinese human rights activists. He also said the investigation indicates those attacks weren’t successful. Furthermore, he said Google has made changes to its security infrastructure to better protect against any similar attacks.

If Google does in fact cease operations in China, it will be abandoning one of the fastest-growing economies in the world with huge growth potential. China is also considered a huge potential market for mobile devices based on Google’s Android operating system, though it’s not known what the impact Google’s decision would have on mobile.

“The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences,”
Drummond wrote. “We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.”

IDC search and advertising analyst Karsten Weide said Google wasn’t making a lot of money in China, relatively speaking, and may have decided the hassles with the government there isn’t worth staying. He estimates Google brings in about $100 million in revenue per year from China via its search operations.

“But there will be a day when ad revenue from Asia will be more than the U.S. and Europe combined. Google knows this so this is a strange announcement if Google follows through,” Weide told

But Weide also said Google is making a mistake if it thinks it can get much of anything in the way of concessions from China. “That’s a ‘when hell freezes over’ thing,” he said. “China’s been very intransigent on these kind of issues.”

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