NEW YORK (AdAge.com) -- In the wake of suspected cyber attacks targeting Chinese dissidents and a stepped-up censorship of the web, Google is threatening to shut down operations in China.
"These attacks and the surveillance they have uncovered -- combined with the attempts over the past year to further limit free speech on the web -- have led us to conclude that we should review the feasibility of our business operations in China," the company said.
As a result, Google is changing course on a policy it has followed since it launched there in 2006 under the belief that "the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results."
Rather than cooperate with government censors, Google said it will now only operate in China if it can offer uncensored search results. "We will be talking to the Chinese authorities about the possibility of operating an uncensored search engine in China," a Google spokesman said in an interview. "If that is not possible under their laws, we will close Google.cn."
In an unusual move, Google described the attacks in a blog post on Tuesday, saying the search giant had been subject in December to a "highly sophisticated and targeted attack on our infrastructure emanating from China."
Google said it discovered a number of other U.S. companies were attacked as well, but it appears the "primary motive" was to access the Gmail accounts of known Chinese human rights activists. Only two accounts were compromised, but as a result of the investigation, Google found dozens of other activists in the U.S., China and Europe whose accounts were successfully monitored by third parties through phishing scams and malware placed on their computers.
Revenue from China is "extremely immaterial" to Google, the spokesman said, and consists mostly of Chinese companies placing search ads internationally on Google, which they can continue to do on Google's international site in the event Google.cn is shut down. The only revenue coming exclusively from Google.cn comes from search ads targeting Chinese users of the site.
Google's video site YouTube has been blocked in China since March; a YouTube spokesman said the company doesn't know why.
In the blog post Tuesday, signed by senior VP and chief legal officer David Drummond, the company said it is making both the attacks and stepped-up censorship public "not just because of the security and human rights implications of what we have unearthed, but because this information goes to the heart of a much bigger global debate about freedom of speech."
Baidu will benefit from Google's decision
Accurate online metrics for China are notoriously hard to come by, but China is one of few territories besides Japan where Google isn't dominant.
That country's search market is dominated by Beijing-based Baidu, which handles about 75% of search queries in China, according to Chinese consultancy iResearch, while Google's share is just under 20%.
Another Chinese consultancy, Analysys International, puts Baidu at just over 61% of queries compared to Google's 24%.
Losing Google as a competitor will likely strengthen Baidu's position even further, as well as up-and-coming search engines in China like Tencent's SoSo, Sohu's Sogou, and NetEase's Youdao.
"While the final outcome of the situation is uncertain, we believe there is a high chance that Google.cn will not be allowed to operate without censoring search results," said Dick Wei, VP of equity research at J.P. Morgan in Hong Kong.
"If this is the case, we believe Baidu would likely benefit from a better user experience, since Google.com servers located outside China will likely have larger latency and with potentially the blockage of sensitive results by the China firewall."
Local advertisers, he added, will be "more likely to increase marketing budgets with Baidu given the lack of large-scale advertising search alternatives. Potentially less support in Google.cn products, such as maps, input tools and Tianya could also cause users to increase reliance on Baidu."
Contributing: Normandy Madden
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