Can Google get away with this? Redirects .CN users to uncensored .HK domain

Chinese citizens and government ministers expecting for Google to take a stand today on the continued censorship of its search results, may have been surprised by the company's decision to split the difference: This afternoon, it began redirecting traffic to, rather than pull out its business interests from China. Hong Kong is a special administrative district of China.

In a blog post this afternoon, Google's Chief Legal Officer David Drummond defended the twist -- not exactly a "move" per se -- as perfectly legal, if potentially unacceptable by China's government. "We want as many people in the world as possible to have access to our services, including users in mainland China," Drummond wrote, "yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement. We believe this new approach of providing uncensored search in simplified Chinese from is a sensible solution to the challenges we've faced -- it's entirely legal and will meaningfully increase access to information for people in China. We very much hope that the Chinese government respects our decision, though we are well aware that it could at any time block access to our services."

Drummond's interpretation is a complete reversal of the company's defense upon having officially entered the country in January 2006. In May 2008, Google's China division president at the time, Kai-Fu Lee, told Margaret Warner of PBS' NewsHour that the company had no choice but to house its servers in mainland China and to filter search results using China government rules.

"In order to enter China, we needed to comply with the Chinese laws, which means our servers need to be located in China and that our content, our search results, would be filtered, per local law and regulation," Lee told PBS. "Some people ask us, why do we choose to filter? But, really, that's not the question. We didn't have a choice of filter or not filter. Our choices are, 'A,' we filter, comply by the law, and have a legal presence in China or, 'B,' we don't enter China. And we feel that we chose 'A' because we felt to engage and to offer as much information as we could was the right decision." Lee left Google in September 2009.

A preliminary check by Betanews of search results from revealed a distinct lack of censorship, especially of the types of results Lee pointed to as typical omissions, including the 1989 Tiananmen Square massacre of student protestors. However, links to YouTube videos were missing from the .HK version. As Google's new China Availability Status page indicates, YouTube service is no longer being extended to China, including through the .HK domain.

Perhaps in an effort to demonstrate its own lack of censorship -- or to prove to Google what it might be missing out on -- the state-run Chinese news service Xinhua posted on its front page a blatantly hit-grabbing slideshow purportedly featuring scenes of worldwide "naked protests," though also managing to feature pictures of folks who happened to be naked and not protesting anything.

Some folks still read Xinhua for the articles. Earlier this morning, before the redirection, the state-run agency indicated it may very well be afraid of what a Google pullout from China might have meant for the rest of its economy, in an editorial that stated it would have no effect whatsoever.

"Google's threat to exit China has led some people to hastily conclude that China's investment environment for foreign-funded enterprises is worsening," the op-ed reads. "However, they should not be prejudiced by an individual case but see the broader picture that China remains one of the best investment destinations in the world. Just as China's Foreign Ministry spokesman Qin Gang said last week, Google's possible withdrawal is only an individual business act, which would not affect China's investment environment or change the reality that most of the foreign enterprises, American companies included, have been doing well and making profits in China."

Until China's government takes its own action -- which it may yet do -- Google still has access to what global analytics firm StatCounter estimates to be about 41% of search traffic, from what was recently estimated to be 338 million Internet users in that country. That's still a sizable chunk of advertising traffic. But by effectively turning off its presence on the .CN domain, Google may be engineering an effort to reverse one of the recent effects of globalization, as noted in the company's own recent filings with the US Securities and Exchange Commission.

After the first quarter of 2009, during the height of the global economic slump, cost-per-click (CPC) -- the general index of how much advertisers receive from click-thrus, based on what they bid -- declined sharply. At the time, Google explained the decline this way: "The decrease in the average cost-per-click paid by our advertisers was primarily the result of the strengthening of the US dollar relative to foreign currencies (primarily the British pound and the Euro). In addition, the decrease in the average cost-per-click was due to how we believe advertisers managed their advertising costs in response to the general economic downturn. Specifically, we believe that as a result of the general economic downturn, advertisers, in aggregate, have lowered their bids for keywords in response to a decrease in the sales they are able to make per paid click."

But as the economy gathered strength, CPC did not. For its quarterly report for the end of calendar year 2009, Google borrowed the same language from its earlier reports for the explanation. But this time around, it added a portion to this sentence: "The decrease in the average cost-per-click paid by our advertisers was primarily the result of the general strengthening of the U.S. dollar relative to foreign currencies (primarily the British pound and the Euro), as well as changes in geographical mix due to traffic growth in emerging markets, where average cost-per-clicks are typically lower, compared to more mature markets."

For the company's second quarter 2009 earnings call (check Seeking Alpha for the transcript), Google SVP for Product Management Jonathan Rosenberg narrowed the list of countries responsible for the emerging market trend worldwide, down to two: "Just to comment on the clicks across the system, I think the growth is more seasonality and mix. One of the things that we see is that Brazil and China, for example, are pretty significant and probably have disproportionately more clicks. So I think we are seeing a mix of clicks from the high CPC Western European countries and US being less relative to some of the growing markets. So that overall is having downward pressure on CPC."

A complete pullout from China may have helped un-dilute the CPC mix, but at a higher cost. This way, at least for a time, Google may be able to retain its China audience while blocking, to borrow a phrase from the Chinese government, unwanted elements.

It's at this period where the comments of Google's senior counsel, Andrew McLaughlin, at the start of its China experiment, may ring truer than ever: "To some people, a hard compromise may not feel as satisfying as a withdrawal on principle, but we believe it's the best way to work toward the results we all desire."

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