Monday, March 22, 2010

Google in China

On January 12 of this year, Google announced that it would pull out of the Chinese market unless the Chinese government eased the censorship restrictions to which Google had reluctantly agreed to when it entered what is set to become the most important internet market in the world. As has been well documented, the announcement on Google's official blog was prompted by cyber-attacks on its servers that originated in China in mid-December. While Google had for years endured Chinese policies with which it did not agree with in order to serve the search needs of millions of Chinese users, it felt that China had crossed a line by attempting to hack into the personal email accounts of Chinese human rights dissidents. After months of uncertainty as to Google's actions with respect to its presence in China, it has recently been widely reported that Google will be pulling out sooner rather than later. The Google-China issue shines new light on the issue of Corporate Social Responsibility.

The issue of Corporate Social Responsibility is a thorny one in today's business world. There are those that advocate that corporations have a responsibility towards the social good beyond what it may mean to their bottom line. There are those that argue that the social good is best served only if corporations focus entirely on increasing their profits. The practice of green-washing seems to have been accepted as a win-win solution to the issue as companies adopt socially responsible projects as a marketing technique - therefore serving the greater good and increasing profits at the same time.

Google will forego nearly 600 millions US dollars in revenue in 2010 by pulling out of the Chinese market and will lose its current 35% share of that market. While Chinese revenues currently only represent 3% of Google's total Global revenues, there is no doubt in anybody's mind that the importance of China within the Global online market is headed upwards. By pulling out of the Chinese market, Google is not only giving up on current revenues, it is also giving up on its market presence and its ability to reap future rewards from the market as well as its ability to sell Chinese advertising space to foreign companies as the Chinese domestic market becomes more important.

In spite of the monetary consequences of its decision to pull out of China, Google seems intent on standing firmly behind its believes. Investors, giving their opinions with their wallets seem to disagree with Google's decision as its stock price drops, it's loyal base of users, wanting to believe that Google's "do no evil" philosophy is more than a marketing slogan are happy that Google is actually standing on the side of human rights. What effect Google's decision will have on its current and future profits, on China's human rights policies (joint Google-US government demands that China ease its online censorship policies) and on its brand perception remains to be seen - the outcomes of these uncertainties will determine the wiseness of Google's decision. However, what is certain, is that Google's decision goes beyond green-washing as they have been made irrespective of the direct consequences on current and future revenues.

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