U.S. Secretary of State Hillary Clinton recently got involved in the ongoing standoff between Google and the Chinese government. Beijing is less than pleased.
On Friday, Chinese foreign ministry spokesman Ma Zhaoxu had harsh words for Clinton following a speech she gave in Washington on Thursday which cited China as one of the countries where there has been “a spike in threats to the free flow of information” over the past year. (See â€œGoogleâ€™s Secretary Of State.â€)
Clintonâ€™s remarks were in response to an ongoing standoff between Google and the Chinese government over cyber-security and Internet censorship. Earlier this month Google threatened to shut its local site, Google.cn, over security concerns. Cyber-security alarm escalated after Chinese search engine and Google rival Baidu was hijacked for about four hours by a hacker group called “Iranian Cyber Army.” Separately, Google accused someone in China of breaking into Gmail accounts used by Chinese human rights activists. (See â€œBaidu Hijacked By Cyber Army and â€Microsoft Acts To Ward Off Attacks.â€)
Google now hopes to reach an agreement with the Chinese government on how it can “operate an unfiltered search engine within the law, if at all,” according to a statement made earlier this month by David C. Drummond, Google senior vice president of corporate development and chief legal officer. (See â€œBaidu Rises On Google Concern.â€)
On Tuesday Beijing said that it welcomes law-abiding foreign Internet companies, referring specifically to Google for the first time since the dispute began on Jan. 12.
â€œForeign enterprises in China need to adhere to Chinaâ€™s laws and regulations, respect the interests of the general public and cultural traditions and shoulder corresponding responsibilities. Google is no exception,â€ spokesman Ma said Tuesday.
On Friday, Ma defended Chinaâ€™s Internet policies, saying the nationâ€™s regulations followed Chinese law and did not interfere with the cyber activities of the worldâ€™s largest online population.
“Regarding comments that contradict facts and harm China-U.S. relations, we are firmly opposed,” Ma said in a statement posted Friday on the ministry’s Web site. “We urge the U.S. side to respect facts and stop using the so-called freedom of the Internet to make unjustified accusations against China.”
Since launching in 2005 Google willingly censored Google.cn search results relating to sex, pornography, controversial politics and other material deemed subversive by the Chinese government. In the last year Chinese authorities have generally tightened Internet controls, both within China through the self-censorship and filtering that Google.cn has adhered to, as well as at the countryâ€™s borders by blocking Google-owned YouTube, as well as Facebook, Twitter and numerous human rights, news and blogging sites deemed objectionable by Chinese authorities. (See “Google Wakes” and “See You On Baidu.”)
On the flip side of Clintonâ€™s remarks, Microsoft Chief Executive Steve Ballmer, in a speech to oil company executives in Houston on Thursday, criticized Google for its threats to leave China after the cyber-attacks, suggesting that Googleâ€™s decision to no longer filter out Internet searches objectionable to the Chinese government were an irrational business decision. After all, Ballmer said, the U.S. imports oil from Saudi Arabia despite the censorship that goes on in that country. (See â€œMicrosoftâ€™s Ballmer Calls Out Google Over China Stanceâ€ and â€œMicrosoftâ€™s â€˜Donâ€™t Be Evilâ€™ Dilemma.â€)
Google still willingly censors search results in India, France, Germany, Thailand and Turkey. (See â€œWhere Google Still Censors.â€)
Since the face-off began with China, Google has also delayed the launch of its mobile phones in the Middle Kingdom. (See â€œGoogle Postpones Phone Launch In China.â€)
Amid the continuing debate, Google posted worse-than-expected earnings on Thursday.
Kaufman Bros. analyst Aaron Kessler said Google’s fourth quarter was solid and that the sell-off–shares closed down 5.7% to $550.01 on Friday–is an “overreaction.”
Mountain View, Calif.-based Google said it earned $2 billion in its fourth quarter, or $6.13 per share, missing analyst estimates for earnings of $2.1 billion, or $6.48 per share. Analysts had been nudging their estimates for Googleâ€™s quarterly earnings higher over the past month on expectations that advertising was strong over the Christmas season.
Jefferies analyst Youssef Squali was pleased with Googleâ€™s quarterly performance overall but was concerned that growth in pricing, measured in cost-per-clicks, slowed to 2% sequentially over the third quarter. However, average cost-per-click, which includes clicks related to ads served on Google sites and the sites of its AdSense partners, increased 5% over the fourth quarter of 2008.
Squali added that “we would not read too much into the above issues as we do not believe they represent the beginning of a trend. We find Google to be very well positioned for 2010.”
Google beat The Streetâ€™s consensus call on fourth-quarter revenues with a top-line figure of $6.7 billion, easily beating the $4.9 billion analysts had expected and 17.5% higher than year-earlier revenues of $5.7 billion, when the company took a $1 billion impairment charge on its investments in AOL and wireless communications services provider Clearwire.
â€œGiven that the global economy is still in the early days of recovery, this was an extraordinary end to the year,â€ said Chief Executive Eric E. Schmidt.
Google added features to its search results page over the quarter that helped it increase interest and activity in search, as well as a propensity to click on ads. These included better real-time and video results, as well as product images.
There is some evidence they worked. After an extended loss of overall search market share following the introduction of Microsoft’s Bing search engine last spring, Google appears to be winning back some of its users. (See â€œGoogle Looks To Gain Again.â€)
Itâ€™s been a volatile market for advertising-dependent companies like Google and its longtime rival Yahoo!, which is due to report quarterly earnings next week. Google shares have fluctuated more than 300 points in the last year, hitting a low of $288.35 in March of last year and peaking at 629.51 earlier this month. Shares of Yahoo! closed down 2% to $15.88 while Microsoft lost 3.5% to $28.96.