Commentary

Google Is Destined To Fail In China

Tech Market WatchGoogle seems to think that it can not rule the world without having a firm grip over China's Internet population. And that probably won't happen any time soon.

Google's inability to gain a foothold in China is not related to the search engine market being a poor sector. Piper analyst Safa Rashtchy has been correct for many years in placing his money on the booming search engine market and everyone knows that search engines are "in", right? Internet search engine markets are hot!

Google's inability to succeed in China instead resides in it not being a Chinese company.

Even with the hype surrounding Google's hire of the former Microsoft executive, Dr. Kai-Fu Lee, and other top grabs from Chinese companies like 1pai, Google's fundamental stumbling block in China comes from its failure to adapt to being a true Chinese Internet company.

Yahoo tried many times to adapt. As far back as 1998 (or Web 0.98 Beta) when its then-VP, Heather Killen, made high-profile visits to China, the Western Internet company tried to sit at the Chinese banquet table. But Yahoo finally gave up last year when it bought a billion dollar stake in China's Alibaba.com and then gave Alibaba the rights to run Yahoo China. There was not even a whimper from the company as its Chinese portal was torn down and replaced with a simple search engine. Sohu, Sina, and Netease had finally beaten the foreign interloper.

Lycos tried too. It bought firms like Myrice.com. Netscape tried, via AOL. MSN has also been bobbling along with a few victories here and a few setbacks there–nothing much to be proud of.

All of these companies have one thing in common: they entered China to win, but left only remnants of their power after a few years' struggle. Chinese history is filled with tales of foreigners coming to the Middle Kingdom with money, but leaving the country poor, confused and embarrassed. Ask Chris Patten.

What are the main attributes of being a Chinese Internet company that Google will never be able to emulate?

Didn't we all learn in elementary school how socialist countries place "cooperation" above the capitalist nations' notion of "competition"? It's a simplistic view, but one many of us were taught. Cadres are rolling over in their graves about how money-hungry Chinese society has become, but there is still fear among all Chinese Internet companies that they do not want to grow too big and become the sole titan in the industry. Titans fall hard in China, so oligarchy reins in the veins of Internet entrepreneurs (as much as they hate to admit it). Will Google be happy as an equal among giants, or does it need to tower over the Chinese firms? It can't be an equal, and its China-confused foreign investors won't let it.

I was attending a small wedding for one of China's Internet gurus, and the CEOs from many of China's top technology companies were in attendance. They were all chums and getting along fine, even though the press portrays them as vicious competitors. Can Google sit at that table? No, it doesn't have the pedigree and it has not "eaten the bitterness" that the other domestic firms have ingested.

Google is a very open company when it comes to press releases and movements within its firm. But there are many things that can happen to a business in China that might seem fine on the mainland, but won't work in the halls of Wall Street or in the glare of Sarbanes-Oxley. Sohu.com has gotten away with the firing of top executives without notice to the press. Sina.com gets embroiled in a lawsuit that, if it were an American firm, would get it airtime on CBS's "60 Minutes" show, but in China it only gets a few quick blurbs in the Chinese press. Can Google live like this? Can it look itself in the mirror each morning and say "No Evil!" or will it instead say, "Hear no evil; See no evil"?

Currently in North America, Google rules search, Yahoo rules the Web, and Microsoft rules the operating system. Though this is a generalization, it is true to a large degree that just about no other company can currently top these three companies in their respective sectors.

But in China, rival Internet companies have developed a symbiotic relationship. Sohu, Sina, and Netease all provide pretty much the same services and they all developed along the same faddish tracks: first, a portal with free email; second, news and community; third, wireless/SMS/MMS content; and now, online gaming. There is always talk of one of these three buying the other, but not much happens. Late arrivals like the carpetbagging Tom.com can even get a slice of the Internet pie.

In the bigger picture, Google's inability to conquer the China market is an indication of its eventual demise around the world. In the same way that Microsoft kicked Netscape into oblivion by looking at the company's services, and then adding them on to its proprietary operating system, Microsoft will do the same thing to Google. When the Vista operating system launches, Google's desktop and browser add-ons will be old-school programs we do not need anymore.

This week Google finally came clean that it plans to self-censor its search results. What a relief. At least it is being honest. Other foreign and domestic firms tiptoe around Chinese censorship like it is a bogeyman ready to drop share prices. Google's shares dipped last week prior to the announcement, so the firm had nothing to lose this week in making the announcement.

For those armchair Sinologists uncomfortable with Google censoring content, rest assured that the company is not really welcome in China and thousands of years of history show that it can't last long here either.

About the author:
The author is a writer and correspondent for ChinaTechNews.com and can be reached here at the site. The author does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.

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