Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

Google wants to reopen for business in China more than six years after the company sharply curtailed its operations there.

There are a couple of big problems with a return to China, apart from the obvious one of complying with censorship restrictions: The country's internet users have learned to live without Google. And Google itself glosses over the cyberattacks that contributed to its retreat in the first place.

To recap the situation: The company now called Alphabet has run its Chinese-language internet search from Hong Kong since 2010, when it moved its computer servers to stop complying with China's online censorship laws and after government-backed hackers attacked Google's computer systems. 

Google Shutout
With Google a bit player in China, domestic companies dominate the country's digital advertising market
Source: Emarketer estimates for 2016
Note: Revenue estimates exclude Hong Kong

People in China can in theory still search with Google, but it tends to be slow as molasses, it's impossible to access some information the government doesn't like, and Google websites are completely inaccessible for stretches. And while smartphones based on Google's Android technology dominate China, Google's own mobile apps and its Google Play app store are somewhere between hobbled and absent. Google is a bit player in the country with the largest numbers of internet users and yearly smartphone sales.  

Google has for years considered ways to get back into the country. Some news reports have indicated this might be the year Google returns, perhaps in partnership with local tech firms or by creating a China version of Google Play.

When Google executives are asked in public, they tend give nonspecific answers that express a desire to reopen full operations in China as long as they don't have to make too many uncomfortable compromises regarding censorship. "Where possible, we want to be in China serving Chinese users," Sundar Pichai, CEO of the Google unit of Alphabet, said at the Code tech conference last week. 

It's easy to understand why Google -- and Facebook, too -- want to find a way into China. It is the second-biggest market in the world for internet advertising, which eMarketer estimates will top $40 billion this year, or about 60 percent of the annual digital ad spending in the U.S. Google and Facebook grab the lion's share of online ad spending in the U.S., but in China domestic companies led by Baidu and Alibaba dominate. 

China's Tech Superpowers
China's internet titans are among the world's most valuable consumer technology companies
Source: Bloomberg

But it won't be easy for Google to make a China comeback, even if the company finds a palatable agreement with the country's internet cops. The country's 700 million internet users have moved on without Google. 

Google's web search had roughly one-third market share in China in 2009, though China's Baidu was far ahead. Now Google's market share is about 10 percent, while Baidu handles about 80 percent of all web searches in China, according to a PwC report last year. Without Google's app store available in China, domestic companies including Baidu and smartphone maker Xiaomi have created chaotic but flourishing bazaars for smartphone apps.

This is not the same China as when Google started its Chinese language search engine 10 years ago. Then, local tech companies copied innovations that originated elsewhere. Now China's homegrown Mark Zuckerbergs have leapt even or ahead of the rest of the world in areas such as smartphone messaging and "online to offline" services like food delivery and on-demand taxis. Xiaomi, Tencent's WeChat and others have created hugely popular technologies tailored to Chinese habits.  

It also doesn't help that Google tends to be selective about the reasons it shut down engineering operations in China. “We left in 2010 because they had these very, very strict rules about censorship and we just were unable to operate morally from our perspective under the censorship rules,” Alphabet's executive chairman, Eric Schmidt, said last week.

That’s true. But Schmidt and other executives tend not to mention the series of state-backed cyberattacks in 2009 that helped trigger Google's change of heart about China. At the time, Google said the hackers broke into Gmail accounts of activists opposed to China's government policies. The cyberattacks also rippled to major U.S. companies including Dow Chemical and Rackspace.  

While Google has bolstered its online security since 2010, Chinese cyberattackers have stepped up their abilities, too. Google executives' selective memory on China remains relevant because the company owes human rights groups assurances that returning to China won't expose them anew. 

China made it inhospitable for foreign web companies, and it worked in germinating a successful domestic internet industry. Both because of China's restrictive Great Firewall and the particular needs of Chinese consumers, the country doesn't live on the World Web Web but a Balkanized web all its own  -- for better and for worse. China's internet doesn't need Google, and Google doesn't need the headaches of China, either. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Google does have hundreds of employees in China, and it sells ads in the country to support Chinese app developers.

  2. The web companies' paltry presence in China makes it all the more remarkable that Apple has had such success there, though not without its own hiccups. LinkedIn launched in China a couple of years ago after coming to an agreement with Chinese censorship requirements.

  3. Chinese officials have denied connections to cyberattacks on Google or other companies.

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net