|Google Partners Likely to Sever Links Over China Row (Update1) |
By Mark Lee
March 23 (Bloomberg) -- Google Inc. partners in China are likely to follow billionaire Li Ka-shing’s lead and cut links with the U.S. Internet company after it defied the nation’s self-censorship rules.
Li’s Tom Online stopped using Google’s search engine on its portal and media buyer Zenith Optimedia said advertisers it represents may switch to rivals after Google began redirecting mainland users to an unfiltered offshore site. China Mobile Ltd. has a deal with Google to provide mobile and Internet services.
“All these guys will have to shy away from Google -- the government has made it quite clear it will not favor them,” said Paul Wuh, head of telecommunications and Internet research at Samsung Securities Co. in Hong Kong. “People will eventually stop using Google.”
Mountain View, California-based Google escalated a two- month censorship row with the government in the world’s biggest Internet market yesterday by routing China-based subscribers to a search service on its Hong Kong site. The move puts at risk business in China that JPMorgan Chase & Co. forecast could have generated $600 million of sales this year.
“If traffic at Google’s Hong Kong site is not as good as the Chinese site, advertisers will switch” to other online search providers, said Elinor Leung, head of Internet research at CLSA Ltd. Operators including Baidu Inc., Tencent, and Sohu.com Inc. will benefit, she said.
‘Effectively a Pullout’
“As far as the search business goes, the latest action is effectively a pullout from China,” said Steven Chang, the Shanghai-based chief executive officer for China at Zenith Optimedia, which buys advertising from Google and Baidu on behalf of clients. “Google’s value proposition to advertisers in China will have been diminished” by yesterday’s move.
Baidu, operator of the country’s biggest search engine, rose $10.50 to $590.22 at 9:54 a.m. New York time on the Nasdaq Stock Market. Sohu gained 31 cents to $55.07. Tencent, China’s biggest Internet company by value, rose 1.5 percent to close at HK$158.20 in Hong Kong today.
Google said on Jan. 12 it was no longer willing to censor content on its Chinese site after it was targeted by cyber attacks from within China. Hackers obtained proprietary information and e-mail data of some human rights activists in a “highly sophisticated attack,” the company said at the time.
Users of the Google.cn Web site will now be taken to the Google.com.hk site as the Mountain View, California-based company seeks to operate an uncensored service in China that won’t infringe local laws, the Internet operator said yesterday.
Hong Kong has a separate government and economy, a legacy of the Chinese region’s status as a British territory until 1997, though mainland authorities have since exercised powers to reinterpret local statutes. At the handover of sovereignty, China promised to preserve Hong Kong’s capitalist system and free press for a further 50 years.
Google’s decision to stop filtering its site was totally wrong, the state-run Xinhua News Agency cited an official as saying today. China censors online content it deems unacceptable by blocking offshore Web sites such as Youtube.com and Twitter.com. Traffic redirected to Google’s Hong Kong site was still subject to Chinese government filters today.
Tom Online said it had removed Google from its Web site. It is using Baidu’s search services on its site today, though the unit of Hutchison Whampoa Ltd.’s Tom Group Ltd. was offering Google’s search engine last week.
“Our practice is to work with companies that are compliant with regulations,” said Elaine Feng, executive vice-president at Tom Online. She said the Chinese Internet company ended its relationship with Google after the expiry of an agreement, without giving details on the timing.
Google teamed with China Mobile in January 2007 to offer mobile and Internet services in the world’s most populous country. The U.S. firm also struck a partnership with Sina Corp. to provide search on China’s third-most visited Web portal.
Rainie Lei, spokeswoman at China Mobile, didn’t immediately reply to e-mail and phone messages seeking comment. Cathy Peng, a spokeswoman at Sina. declined to say if the company plans to retain its search agreement with Google.
Baidu, based in Beijing, accounted for 58.6 percent of China’s online search market last quarter, compared with 35.6 percent for Google, according to research company Analysys International.
Li, chairman of Hutchison Whampoa, is Hong Kong’s richest individual with wealth of $21 billion, according to a Forbes magazine survey.