Case study 5 | Google in China

Google, the fast-growing Internet search engine company, was established with a clear mission

in mind: to organize the world's information and make it universally accessible and useful.

Google has built a highly profitable advertising business on the back of its search engine, which

is by far the most widely used in the world. Under the pay-per-click business model, advertisers

pay Google every time a user of its search engine clicks on one of the paid links typically listed

on the right-hand side of Google's results page.

Google has long operated with the mantra don't be evil! When this phrase was originally

formulated, the central message was that Google should never compromise the integrity of its

search results. For example, Google decided not to let commercial considerations bias its

ranking. This is why paid links are not included in its main search results, but listed on the right

hand side of the results page. The mantra don't be evil, however, has become more than that

at Google; it has become a central organizing principle of the company and an ethical

touchstone by which managers judge all of its strategic decisions.

Google's mission and mantra raised hopes among human rights activities that the search

engine would be an unstoppable tool for circumventing government censorship, democratizing

information, and allowing people in heavily censored societies to gain access to information

that their governments were trying to suppress, including the largest country on earth, China.

Google began a Chinese language service in 2000, although the service was operated

from the United States. In 2002, Chinese authorities blocked the site. Would-be users of

Google's search engine were directed to a Chinese rival. The blocking took Google's managers

totally by surprise. Reportedly, co-founder Sergey Brin immediately ordered half a dozen books

on China and quickly read them in an effort to understand this vast country.

Two weeks later, for reasons that have never been made clear, Google's service was restored. Google said that it did not change anything about its service, but Chinese users soon found that they could not access politically sensitive sites that appeared in Google's search results, suggesting that the government was censoring more aggressively. (The Chinese government has essentially

erected a giant firewall between the Internet in China and the rest of the world, allowing its

censors to block sites outside of China that are deemed subversive.)

By late 2004, it was clear to Google that China was a strategically important market. To

exploit the opportunities that China offered, however, the company realized it would have to

establish operations in China, including its own computer servers and a Chinese home page.

Serving Chinese users from the United States was too slow, and the service was badly

degraded by the censorship imposed. This created a dilemma for the company given the don't

be evil mantra. Once it established Chinese operations, it would be subject to Chinese

regulations, including that censoring information.

For perhaps 18 months, senior managers inside the company debated the pros and cons of entering China directly, as opposed to serving the market from its U.S. site. Ultimately, they decided that the opportunity was too large to ignore. With over 100 million users, and that number growing fast, China promised to become the largest Internet market in the world and a major source of advertising revenue for Google. Moreover, Google was at a competitive disadvantage relative to its U.S. rivals, Yahoo and Microsoft's MSN, which had already established operations in China, and relative to

China's homegrown company, Baidu, which leads the market for Internet search in China (in

2006 Baidu had around 40 percent of the market for search in China, compared to Google's 30

percent share).

In mid-2005, Google established a direct sales presence in China. In January 2006, Google

rolled out its Chinese home page, which is hosted on servers based in China and maintained by

Chinese employees in Beijing and Shanghai. Upon launch, Google stated that its objective was

to give Chinese users the greatest amount of information possible. It was immediately

apparent that this was not the same as access to all information. In accordance with Chinese

regulations, Google had decided to engage in self-censorship, excluding results on such

politically sensitive topics as democratic reform, Taiwanese independence, the banned Falun

Gong movement, and references to the notorious Tiananmen Square massacre of democratic

protestors that occurred in 1989.

Human rights activists quickly protested, arguing that Google had abandoned its principles in order to make greater profits. For its part, Google's managers claimed that it was better to give Chinese users access to a limited amount of information, than to none at all, or to serve the market from the United States and allow the government to continue proactively censoring its search results, which would result in a badly degraded service. Sergey Brin justified the Chinese decision by saying that it will be better for Chinese web users, because ultimately they will get more information, though not quite all of it. Moreover, Google argued that it was the only search engine in China that let users know if search results had been censored (which is done by the inclusion of a bullet at the bottom of

the page indicating censorship).

Case Discussion Questions

1. What philosophical principle did Google's managers adopt when deciding that the benefits of operating in China outweighed the costs?

2. Do you think that Google should have entered China and engaged in self-censorship, given the company's long-standing mantra Don't be evil? Is it better to engage in self-censorship than have the government censor for you?

3. If all foreign search engine companies declined to invest directly in China due to concerns over censorship, what do you think the results would be? Who would benefit most from this action? Who would lose the most?