Google Inc’s (NASDAQ: GOOG; LSE: GGEA) dispute with the Chinese government over alleged cyber attacks on Google e-mail and source code is the talk of the town.
As a result of this tiff, Google has indicated that it may close down its operations in China.
Industry wide losses
Any such withdrawal, from what has emerged as the fastest growing market of the world, will leave the Microsoft (NASDAQ: MSFT, HKEX: 4338), Yahoo (NASDAQ: YHOO), and Baidu (NASDAQ: BIDU) in the fray to grab a bigger pie of the Internet market.
Investors opine that should Google exit the world’s most populous country, Baidu, China’s own dominant search engine China will reap the maximum benefits.
As on date, a large number of advertisers have a business tie up with Google. The latter’s shutting shop in the country will warrant them to forge new alliances with new, less familiar, foreign operators.
These partners are evidently less integrated with their ad operations. They may take a long time to form smooth working relations with their new partner and incur losses in the interim.
The market shares
About a week back, Google proclaimed that it would refrain from the policy of censoring its search engine in China even if led to the cancellation of its business license in the country.
While the Chinese government and Google are at loggerheads, Baidu's stock is making hay and has zoomed 21 percent on the NASDAQ. A whopping $2.8 billion have been added to Baidu’s market value in just three days.
Baidu already enjoys leadership position in the country and commands 59 percent of the market share in industry it operates in. Google is a distant second with 30 percent pie of the market.
Yahoo with 6 percent share, Bing with 4.5 percent share are the ‘also-ran’ when it comes to Internet business on Chinese soil. The two will have to fight it out for the ‘left over’ share of Google to increase their footholds in the country
Not so easy
Being a Chinese company, complying with government demands for censorship is a Hobson’s choice for Baidu.
Jeremy Goldkorn, founder of Danwei.org and an online media expert in Beijing opined, "Baidu does face the same censorship issues, but without the corporate culture that resents censorship."
Referring to strictures issued from time to time by the authorities, Rebecca MacKinnon, an Open Society fellow said, "Whether it's Baidu or Chinese versions of YouTube or Sina or Sohu, Chinese Internet sites are getting daily directives from the government telling them what kinds of content they cannot allow on their site and what they need to delete."
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