Group D -Group D - Nicola Morelli, Han Zhou, Tiana Seymore, Jakob Mose Olesen, Luca Pignatelli, Franziska Zindl

AGENDA

Hold“We made

“Foreign enterprises in Chinaneed to adhere to China‘s lawsand regulations……and shoulder correspondingresponsibilities“

2

HoldValuesOverProfits

“We madethe decision to enterthe market becausewe believe in makinginformation availableand accessible“

(Google Communication and Public Affairs)

responsibilities“

(Ma Zhaoxu Foreign Minister spokesman)

Group D

COMPANY DATA

• Founded by Larry Page and Sergey Brin

• August 1996: first version of Google

• September 1998: first office in California

• 2000: largest search engine in the world

• 2010: $ 600 million revenues in China• 2010: $ 600 million revenues in China

– Revenues from 2004 to 2010 increased about 830% worldwide

3Group D

THE CHINESE SEARCH ENGINE MARKET IN 2000

Dimension:One of the largest Internet markets in the world

Growth:High degree ofexpectedgrowth

Competition:Fragmented market, but sensitive to advertising

Barriers:Highly protective government

Cultural diversity:Lack of language knowledge

Group D 4

the world

ENTER

GOOGLE IN CHINA

Sept.: Entering Chinese market (24 million web pages in Chinese)

�Exit OR server located in China� Market share: <30%; Baidu: 46%

2003: #1 in search engine market� Share: 34.8%; Baidu 2.5% End 2009: Google was faced

with a cyber attack

Jan.: No censoring of Google‘s search resultsanymore

Mid 2005: Ownserver but censoredresults

5

Aug. 2002: Redirectionto local search whentyping www.google.com Nov. 2004: Blocking

of Google News �forced to switch toChinese version

2000 2005 2010Jun. 2006: google.cn was blocked

Group D

Sept. 2002: Set up of filtering system �

blocked access to Google

Jun. 2009: -Remove `suggest` feature from google.cn- google.com + gmail were blocked- Research results only from within China

Sept. 2004: Start of Google News

2008: Baidu had problems �try to regain market share

MAIN ISSUES

Stay

RevenuesPhilosophy

Group D 6

GovernmentCompetition

� Making information available and accessible� Making information universal

GOOGLE‘S PHILOSOPHY

Strategy for China

� Providing censored results was better than not providing any detail� Providing more information for the Chinese and be a more effective service � It will be better for Chinese web users, because ultimately they would get more

information, though not quite all of it- Sergey Brin, founder of Google

MAIN ISSUES

Stay

RevenuesPhilosophy

Group D 8

GovernmentCompetition

REVENUES AND MARKET SHARE - CHINA

64

123

212

332

436

600

0

100

200

300

400

500

600

700

- Revenues from China were around 2% of Google's total global revenues- Revenues increased significantly from 2004 to 2010 (estimated)

Group D 9

0%

10%20%

30%40%50%

60%70%80%

90%100%

2003 2005 2006/ Q4 2007 2008 2009/ Q1

Others

Baidu

Google

02002 2004 2006 2008 2010 2012

- Market share started to drop in 2004 and 2005 from 34.8% (2003)

- It lost its lead position in 2005 while Baidu became the top search engine

- Market share increased gradually from 2006 to 2009

MAIN ISSUES

Stay

RevenuesPhilosophy

Group D 10

GovernmentCompetition

THE MAIN COMPETITOR

• Chinese search engine (2000)

• Amazing market growth– 2003: 2.5% market share– 2005: 46% market share

• Extensive advertisement

• Works with the government

• Online music service

• Mainly students

11

MAIN ISSUES

Stay

RevenuesPhilosophy

Group D 12

GovernmentCompetition

CHINESE GOVERNMENT

Second layer control- Prevent some websites from entering, e.g. facebook, youtube-Block certain portions of websites, e.g. popular US news

First layer control- Internet police: 50,000 people (2007) - Monitor the Internet usage- Using filtering system

- Through emails, websites and blogs, discussion forum

Google‘s Case

• 2002: New filtering system that makes Google.com slow and unrealiable• 2009:

• Threaten Google to remove ‘suggest feature`• Accuse Google of spreading obscenecontent

• 2004: Block Google News in English• Google was unreachable about 10% of the time• 2009:

• Stop Google's blog• Block google.com and gmail for severalhours

MAIN ISSUES

Stay

RevenuesPhilosophy

Group D 14

GovernmentCompetition

THE SITUATION OF GOOGLE IN 2005

• Google faced a lot of blocking actions by the Chinese government since its entry in 2000 with google.com

Exit StayOR

15

- Continuous blocking of information by the Chinese government is againstGoogle‘s philosophy- Significant loss of marketshare

- Following its mission tospread as much informationto everyone as possible- Do not lose China because itis an important market- Revenues

Group D

THE SITUATION OF GOOGLE IN 2005

• Google faced a lot of blocking actions by the Chinese government since its entry in 2000 with google.com

exit stayORFrom 2005, Google had its own server, a representativeoffice and R&D Center in China and decided to censor the

16

-Continous blocking of information by the Chinese government is againstGoogle‘s philosophy- significant lost of marketshare

- following its mission tospread as most as informationto everyone- do not lose China asimportant market- revenues

office and R&D Center in China and decided to censor theresearch results by itself� www.google.cn

Group D

THE SITUATION OF GOOGLE IN 2010

• Google still faced blocking actions by the Chinese government despite its censoring of the search resultson google.cn

17

Exit StayOR

Group D

EXIT OR NOT?

Yes

Exit Completely

Withdraw google.cnbut keep engineers and

Group D 18

Exit China?

No

but keep engineers and programmers in China

CRITERIA

RevenuesPhilosophy

1 2

Group D 19

GovernmentCompetition

34

ADVANTAGES FOR GOOGLE

Stay

Philosophy:•Make information accessible•Become the best search engine

Partly exit Exit

Philosophy:•Uphold reputation

Group D 20

Government:•Provide transparency to users

Competition:•Keep market share

Government:•Minimum interference

Revenues: •Increasing globally

Competition:•Close presence to Chinese Market

DISADVANTAGES FOR GOOGLE

Stay

Philosophy:• Loss of reputation �Users’ perception of Google as unstable•Adhere to Chinese standards

Partly exit Exit

Philosophy:•Less information provided!

Revenues: •Loss of Revenue

Philosophy:•Less information provided!

Revenues: •Loss of revenue

Group D 21

Government:•Continuous censorship

standards •Loss of Revenue•Loss of jobs•Loss of future growth•Loss of current investment

Competition:•Loss of Chinese market share •Loss of future growth•Best search engine?

•Loss of revenue•Loss of jobs•Loss of future growth•Loss of current investment

Competition:•Loss of Chinese market share•Loss of future growth•Best search engine?

RECOMMENDATION

StayWhat should Google do now?

Group D 22

Government

Market Mission

Establish good relationship with the Chinese government- Adapt to the specific condition in China: culture, value, government policy, state law

Effectiveness

RECOMMENDATION – HOW TO STAY

Partners

Quality

Continue to build local strategic cooperation partnerships- Mobile search service by working with China mobile - Cooperate with Sina and Tencent for alliance

Make integrated and high quality search engine- Music, books, pictures, video, news- Google map, gmail, translation, photo, schedule software- High quality advertising service

China - Exit or Stay

We made the decision to stay in the market because we believe in making information

available and accessible

Google in China – main events

2000 (Entrance) 2005 (Stay??) 2010 (Stay??)

Chinese Government – control

TO SUM UP

Group D 24

Censored results

Baidu – 2009 largest search engine in China

Market share 2.5% � ≈ 60%

Market and Revenues – growth

Revenues from China are growing with the number of users

Stay – Final decision

Cooperations + Service