British scribe Paul Carr is not one to mince words. For him, Google’s newfound morality around censorship and China is too little, too late. Four years too late, to be precise. And I agree with him — up to a point. Morality has to be absolute; it cannot be used as a tool of convenience. That said, and despite being a born cynic, I’m actually unable to view Google’s decision through the same lens.
I mean, if as a society we’re all too ready to forgive steroid-enhanced baseball players when they come clean, how is that we can’t give a company a second chance when it finally decides to do the right thing? Moreover, the company is risking a lot of money by adopting what Carr describes as “scorched earth diplomacy” — especially when it comes to Android.
J.P. Morgan estimates that Google’s move is going to cost it some $600 million in 2010 revenues. UBS puts the sales loss forecast in the $400-$500 million range. Others estimate that it could be even lower — between 1 and 1.5 percent of 2010 revenues. Citibank, meanwhile, believes that nearly 1 percent of Google’s profits are at risk.
The wide variance in the loss estimates makes clear that no one really knows how big a financial gamble this decision is. And that alone makes it a brave move.
But while many argue that it isn’t logical for a publicly traded company to take a stance that’s going to hamper its ability to capture the opportunities offered by such a fast-growing Internet market — China currently has 298 million Internet users (and 99.4 million connections) representing just 22 percent of its population — as far as I’m concerned, the biggest impact of Google’s decision will be on its mobile efforts. With more than 638 million wireless users (according to Telegeography), China has already emerged as the world’s largest mobile market. Sales of mobile phones in the country are expected to grow 21 percent this year alone.
The bottom line is that Google’s decision to take on the Chinese political establishment means that it no longer controls Android’s destiny in China. In theory, Android is open source and as such, handled by the Open Handset Alliance. But in reality, it is closely associated with Google. For starters, the banning of Google.cn would close a marketing channel for Google’s Nexus One device, if and when it was launched in China.
The country was well on its way to helping Google grow Android. Chinese handset makers such as Huawei and ZTE have been some of the earliest supporters of the upstart OS. China Mobile already sells its own version of an Android-based phone system called OPhone. Motorola is making a big push into the Chinese market with smartphones based on the Android OS. And China-based Lenovo has developed numerous Android-based products, including the LePhone. Any undue pressure from the establishment would mean that most of these companies would have to abandon Android in favor of other mobile operating environments.
Google’s willingness to risk not only its present (search) but also its future (mobile), shows that as a company it’s willing to go where no Western company has gone before: in China’s face. The next few months will determine whether Carr is being too harsh or I am being too generous in our respective judgments. For now, at least on this one decision, I am on the side of Larry & Sergey.