POSTED: 5:19 a.m. HST, Jul 9, 2010
LAST UPDATED: 10:22 a.m. HST, Jul 9, 2010
BEIJING>> China renewed Google's license to operate a website, preserving the search giant's toehold in the most populous Internet market after it gave up an attempt to skirt Beijing's Web censorship.
Google Inc. said today its Internet content provider, or ICP, license was approved but gave no details of what services it would offer. The company closed its China-based search engine in March to avoid cooperating with Chinese Web filtering but wanted to keep the site to offer music and other services.
Google said in January it no longer wanted to comply with rules requiring it to censor search results after it traced hacking attacks to China. The announcement embarrassed Chinese leaders, prompting questions about whether they might punish the company by shutting it out of China, where Google has a lucrative advertising business and a fledgling mobile phone operation.
"We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China," Google's top lawyer, David Drummond, said in a statement.
The one-sentence statement gave no details. A Google spokeswoman, Courtney Hohne, said information on what services Google will offer in China would be released in coming weeks.
There was no immediate statement on the website of China's Internet regulator, the Ministry of Industry and Information Technology.
Google had to make concessions to get its license renewed, opting not to leave China completely so it could pursue its commercial ambitions — a music service, its mobile phone business, a Beijing development center and a staff to sell ads for the Chinese-language version of its U.S. search engine.
Google had been automatically redirecting users in China to its uncensored Hong Kong search site in what it said was a proposed compromise to uphold the principle of free access to information while keeping a presence in China. But the company said last week it would stop doing that after regulators objected and threatened to revoke its Internet license.
Losing the China license would have been a significant setback for Google, even though China will only account for a fraction of the company's projected $28 billion in revenue this year. China already has nearly 400 million Web surfers and usage is expected to rise for years to come.
For Beijing, the renewal tones down a high-profile dispute at a time when American and European businesses are complaining about unfair treatment by the government and say China has become less welcoming to foreign business.
"Basically, this was a smart move on the part of the Chinese government to kind of defuse the situation," said Paul Denlinger, an Internet consultant for startups. He said that the friction between Google and China won't disappear but will temporarily dissipate.
The outright departure of Google from China would have hurt an Internet industry that Communist leaders see as a source of future prosperity and that they are depending on foreign companies to help develop. Chinese fans of Google left an avalanche of messages on Internet billboards pleading with the company not to leave.
Beijing encourages Internet use for business and education but tries to block material deemed subversive or pornographic. Government task forces monitor foreign websites and use a system that routes traffic through a handful of state-controlled gateways to shut off access to those run by dissidents or human rights and Tibet activists. China has routinely blocked parts of Google's service such as YouTube.
On its China search engine, Google excluded from its results page sites that could not be reached from China, without telling users.
Still, the existence of Web filters is widely known and Chinese can use proxy servers to reach banned sites or install virtual private network software that lets them tunnel through the government barriers.
The license renewal leaves Google in China but with its commercial future unclear.
The China-based Google.cn site lets users click a tab to go to Google's uncensored Hong Kong search site. But industry analysts say that without China-based search, users will defect to local rival Baidu Inc., and advertisers trying to reach a mainland audience won't use the Hong Kong site.
Unlike in the United States, Google is not the dominant player in China, with some 30 percent of the search market to Baidu's 60 percent.
Advertising spending will shift to Baidu and other Chinese sites, said Vincent Kobler, managing director of EmporioAsia Leo Burnett, which buys online advertising space for clients including Marriott International. He said the firm was recommending clients switch to Baidu.
"Even last year before this crisis, Baidu always was in a stronger position," Kobler said. "In terms of media buying, customers in general, despite this news of the ICP license being renewed, are still more comfortable with Baidu."
Google said its license ran through 2012 but had to be renewed annually.
The license renewal means Google will have a chance to see if it can build other lines of business in China: advertising, mapping and the Android operating system for mobile phones.
Things to look out for in coming months include whether Google services are featured on new mobile phones in China, Denlinger said. Motorola had replaced Google functions with Baidu and Google postponed the launch of two Android phones with a Chinese carrier due to the dispute.
"It will be interesting to see if Google can stop the slow bleeding," Denlinger said.
Google, based in Mountain View, California, opened its China site in 2006 to attract more Chinese users after the government filters slowed their access to its main U.S. site, Google.com.