Clock may be ticking for Google to act on China

Two weeks after drawing a line in the sand, analysts hope Google follows through on threat

About two weeks after Google publicly squared off with the Chinese government, the world is still watching for the search company's next step.

Some industry watchers wonder how long Google can wait before some supporters of the initial move start to get frustrated with what they see as a lack of follow through on its threat.

Google announced on Jan. 12 that a major attack launched against its network from hackers inside China had forced it to consider abandoning its Chinese operations. The company also said that the attack, which was aimed at exposing the Gmail accounts of Chinese human rights activists, prompted it to reconsider its agreement with the Chinese government to censor search results of users in the country.

A week later Google CEO Eric Schmidt told analysts during the company's quarterly earnings call that he was holding out hope that it could continue doing business in China. He said on the call that the company was still censoring search results in China, but expects to stop soon.

Analysts surmise that Schmidt appears to be signaling its plan to stop censoring search results to Chinese officials, and that Google won't leave the country voluntarily -- China would have to kick it out.

"Publicly, China has been intransigent. Google drew some lines in the sand, and China has said that it will not bend," said Ezra Gottheil, an analyst with Technology Business Research. "So both parties have said publicly that they won't give in. We don't know what's happening behind closed doors, but my guess is there hasn't been much movement and there will not be for some time."

Google declined to comment on anything to do with its China strategy or whether any talks with the Chinese government are underway.

Dan Olds, an analyst with The Gabriel Consulting Group, suggested that negotiations are likely slow and contentious, based on some of the harsh statements coming from Chinese government officials.

"In light of China's continuing public defense of their censorship policies, I tend to think that any negotiating on China's side is simply them restating their refusal to budge," said Olds. "Google has put its stake in the ground on Web censorship. Are they going to follow through on it? That's the big question."

Olds said that Google is probably busy preparing to stop censoring results, figuring out how to best pull its operations out of China if necessary and on improving the company's security and intrusion detection systems.

"Google outlined its position in a very public and explicit way," said Olds. "At some point soon, people are going to start wondering if Google is going to back up its words with actions. If Google fails to follow through, it's going to look like they violated their principles for money. Their reputation will take a pretty big hit if that happens."

Industry watchers have mostly applauded Google's plan to take a stand against China. Many noted that the search giant has faced a lot of flak in recent years by ceding to China's censorship demands.

Hadley Reynolds, an analyst with IDC, noted that the war of words between Google and China was further fueled last week by U.S. Secretary of State Hillary Rodham Clinton's speech calling on China to stop hindering Internet freedoms.

"The new tensions don't augur well for any early or positive resolution of the Google search censorship controversy," Reynolds noted, adding that he expects China and Google to continue negotiating for some time.

Whit Andrews, an analyst with Gartner, Inc., said he doesn't think there's a lot of pressure yet on Google to hurry.

"This is going to be a long clock that ticks before somebody says Google is backing down," added Andrews. "Google is very well regarded. You're not going to say, 'That's those crazy guys at Google saying crazy stuff that we don't believe again.' If a year goes by, we'll probably say, 'Hey, that's weird they didn't do anything about that.' They've got a lull now though. There's no need for them to act immediately to convince the world they meant what they said."

Other analysts disagreed, saying that people are already watching and waiting for a decisive move by Google.

"I don't think that Google can just let this fade away," Olds said. "In my mind, they have a few more weeks before there needs to be some resolution. At that point, Google should cease the censorship of Chinese search results and let the chips fall where they may. I don't think Google can let this state of limbo drag on for months and months. It will cause damage to their reputation and also signal the Chinese government that Google doesn't have the stomach to back up their words with actions."

And Olds added that, in some respects, this is a hole that Google dug for itself.

"This is the potential problem with Google's initial strong statement," he said. "You can't threaten that you will take some action unless things change, and then not follow through. It really makes you look weak."

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