Google's China problem - the WTO-column

(later a Chinabiz)
When a huge an successful company comes to China and screws up in a massive way, I tend to be fascinated. For nobody the China market is a sure win and everybody is allowed his or her share of mistakes. But then, when you are as huge and successful as Google, the expectations might also be high. But then, I'm not much of a clearvoyant but the current downturn in its Chinese fortune does not come as a surprise.
What comes as a surprise is the speed and the amount Google has been able to lose its market share. Two recent surveys indicated the US search engine has lost about one third of its market. While the domestic search engine Baidu was already a market leader in eyeballs, those were perceived less valuable than the group of relatively older, better educated and better-earning users of Google. The new research indicates that Google has been wiped away in its key markets in Shanghai, Beijing and Guangzhou.

How could that all happen? Very early in this century, Google developed into the key search engine, not only in the US but also in China. We internet users would not know how to survive without what initially was a very simple search engine. So powerful was Google's position in China that when the internet censor got some new tools in 2002 and decided to block Google, it had to retract. The Chinese internet users were so upset about this move, the government had to back down.
There were some strong indications that at the Google headquarters in California, they had not really a clue what was going on.
When Google decided to offer a censored Chinese search engine it caused an outcry among the free-speech movement in the US who wondered what the company who had "Do no evil" as a motto was up to. Chinese internet users were equally puzzled, as they saw no reason to visit the censored Google, since they preferred the uncensored one.
Most people just speculated this would fit into a grand scheme for world dominance by Google, since the idea Google could mess up was too alien for most internet users.
But in June even Google-founder Sergey Brin admitted they might have made a mistake. The Chinese service attracted a poor one percent of the market and Brin suggested they might as well stop the search engine.

Meanwhile since last year Google started to invest in China and in March I attended a Google-party during a search engine conference in Nanjing. It made me a bit upset since in stead of the expected Chinese food, they only offered peanuts and cheap beer. That was a sign they had no clue how to adopted to the local situation. It was also otherwise very hard not to leave with the idea that something was very wrong there. US-Google managers formed islands of loneliness in the party, while outside in the hotel lobby intensive networking was going on. Most of the Google-people I met were freshly hired managers who often had a long track-record in other IT-companies in China. Since it was a party, everybody acted happy. But those seasoned had to swap their business suits for Google t-shirts and play ball games and work out.
Rumors suggest that those people have now stopped playing ballgames and are leaving Google China, because they think it is a sinking ship. Although there has not yet been a good explanation for the sudden drop in market share, there seems to be a pattern.
Earlier other US-based internet companies like Ebay and Yahoo dramatically underperformed in China. In those cases increased domestic competition was one reason. Another was that the American management just did not want to get they had to play in China a fully different ballgame.
"Even for American standards, those companies are a bit weird," told me a US newspaper executive last week. She had visited the US IT-companies regularly in an effort to learn from them.and found herself in a playground of youngster "who are still a bit wet behind the ears". She had one explanation: "It is simply American arrogance".

Fons Tuinstra