Google’s very thinly veiled intimations of pulling out of the world’s largest Internet market highlights the issue of industrial espionage that trouble’s many foreign firms doing business in China. 

The search engine giant would conceivably employ the most sophisticated security systems to protect its network. But if the king of the Web is crying  it can’t take the heat anymore where does that leave  smaller organizations? 

No less than U.S. Secretary of State Hilary Clinton took the Chinese government to task to explain itself when she released a statement on Tuesday saying Google’s allegations “raised very serious questions.” 

“The ability to operate with confidence in cyberspace is critical in modern society and economy,” Clinton said. Earlier, Google had said that it discovered several attacks in mid-December a few days after it hosted a closed-door symposium on circumventing cershoship. 

“First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses — including the Internet, finance, technology, media and chemical sectors — have been similarly targeted,” said Google Chief Legal Officer David Drummond in a  blog posting. “Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists.” 

Throughout its stay in China, Google has had to make concessions with the Chinese government over the issue of Net censorship and privacy. Other foreign players such as Yahoo, have also bowed to Chinese government pressure. 

Some may argue that this sort of thing is just a part of doing business in China. Other forms of pressure have been employed in the past by other governments to protect local business. As Warren Cowan, CEO of Greenlight a U.K.-based search marketing agency said: “You’re welcome to set up shop just don’t outshine the emperor.” 

Cowan was careful to state that there’s no evidence as yet to pin the rap on the Chinese government but Google is the largest competitor of Baidu, the Beijing-based company that hold anywhere from 59 to 77 per cent of the Chinese search market. Google is said to command at least 30 per cent of the entire pie which will be worth more than $1 billion this year.

Google is estimated to have made roughly $23 billion worldwide last year. But the Chinese market although small in comparisson now is of tremendous strategic importance in the future.

It’s highly unlikely that the remaining foreign search engines will benefit much from a Google pullout. Advertisers typically flock to where the traffic is. In the absence of Google, that would be Baidu – which has ruled the local market anyway.

Could Google be using the hacking attacks as a face-saving excuse for a graceful exit from a market it can’t dominate? Very likely, according to San Mateo, Calif-based Kartsen Weide, program director for digital media and entertainment at IDC.

“Everytime an enterprise says they’re doing something for moral reasons, I get suspicious,” he says.

It should be remembered that Google has endured Chinese censorship for the last four years.

The Chinese government is also not expected to back down just because Google complained. To do so would be out of character and would open itself to a flood of complaints from other players.

In raising the spectre of industrial espionage and state censorship, Google has created a graceful exit for itself and painted itself a defender or freedom of sorts.

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  • Doubtful. A global concern like Google isn’t likely to risk its market cap and brand penetration just like that.

    Most likely, this comes down to personal relationships. In an environment like China, everything is about who you know and whose palms get greased. This is all at the personal level and hopefully they’ll come to their senses and think about preserving shareholder value because having a presence in such a substantial market is a huge bonus.