Before I start, I have to say that I’m a little confused over Google’s reason for threatening to pull out of China now, I know they’ve stated that the decision, was a direct consequence of a sophisticated attack and censorship, but the question running around my little brain is why did they agree to the Chinese government’s censorship in the first place?
However, the cost implications to Google if they leave China could be $600 million in paid search just for 2010 [Source J P Morgan], so if it is a ‘matter of principle’ then fair play.
Some people (cynics?) are commenting that perhaps Google is getting shut of a business unit that’s loosing money’… But I don’t think it’s that. Think about YouTube and how much Google have lost since they bought it on 9 Oct 2006 for $1.65 billion. If I was being conservative I’d probably say that YouTube has lost $100m per year so approx total cost to-date $2 billion.
(NOTE: Credit Suisse estimated YouTube’s losses for 2009 alone to be $475m) plus if you take YouTubes running cost of About $711 million, with $360 million in bandwidth charges alone (and you thought your broadband charges were high..!!!) – so I think my estimate is VERY conservative!)
What all this means is, for Google to turn a single cent of profit on the YouTube deal by 2020, it would need to average a $200m in profit for the next 10 years. Ouch!
With this loss, why else would they turn their backs on a potential $600 million from Google China…? Consider also that only 20% of people in Asia are currently on the internet (Source: Internet World Stats) so they would be also turning their backs on the huge potential in the future.
Currently, China’s ‘favoured’ search engine is Baidu.com and the following market share stats show, Baidu dominates in China as much as Google does elsewhere:
Baidu 64% / Google 21% / Others 15% (China Daily)
Baidu 62% / Google 29% / Bing 1% (Analysys International)
Baidu 76% / Google 20% / Yahoo & Bing 1% (Comscore – July 2009)
[Source: Reform Digital]
Personally, I think Google is sticking to its goal of ‘do no evil’. Albeit a little bit late…
But the story really doesn’t stop there. There are other cultures, that you might not have even considered, currently implementing Internet Censorship like Australia – where the Government has decided that the land Down Under will become the only Western Democracy to attempt to censor the Internet (Herald Sun 12/09).
(NOTE: Censorship plans in Australia have been on the table since 2006 [Source: Electronic Frontiers Austrailia] so it appears that the Rudd government wants the same controls over its citizens as the Chinese do)
So if Google does pull out of China should they also pull out of Australia as well? You decide…
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