Google, China and RealEkonomik

You all know by now that Google is pulling out of China (actually, its "May pull out if non censorship request is not met", but that is very unlikely). The reason given is a massive attack on the accounts of Chinese dissidents in Google (and other) companies' servers. But, as was pointed out on the BBC Today program this morning, everyone told Google that would happen when they went in 4 years ago. The Google response this morning was that they hoped that by engaging, Chinese behaviour would change

Another reading - the RealEkonomik reading - is that Google knew this would happen, but that it could not afford to ignore such a huge emerging market so went in with eyes wide open, albeit possibly with rose tinted glasses. As Shefaly Yogendra points out, strategy in China is a new Great Game.

So what's changed? We suspect that as well as an increase in attacks on the servers (Why is China doing it only a problem now, though?*), three other factors have driven them:

- Their reputation in the far more valuable US and European Union market is diving, and both areas are looking at regulation to curb their activity.

- Nothing builds confidence in your new Cloud strategy like knowing its massively hackable by anyone with bit of will and nous

- Penetration in China has been disappointing for Google, its Chinese management has been turbulent, ARPU is still low but costs are not, so its not a great economic benefit at this point

Let's be clear - a publicly owned corporation does not do things on points of ideological principal, Google is doing this as it believes it serves its own best economic interests here and now. In other words, in the short term it would hopefully do Google a lot of PR good (and allay some legal activity) to give China short shrift. In the long term this may prove to be short sighted, but its a reversible decision and in the long term we are all dead - and the current management will long since have taken their pension pots into retirement. Besides, doors are still open....

All that said, it is still thrilling - regardless of the reasons why, they are doing the ethical thing.... Interesting Times are surely ahead.

* It will be interesting to see if other companies like Microsoft and Yahoo report increasing attacks. Also, surely this is a government to government issue if as widespread as claimed? (Update to this - a statement from Hilary Clinton)