When Google first threatened to exit China over concerns about the government’s censorship stance and involvement in a hacking incident, I called Google’s move a “calculated business decision” while at the same time questioning just how calculated it really was.

And when Google decided to run a Chinese language search engine from Hong Kong, I noted that Google was clearly “to have its cake and eat it too“, albeit with little chance of success.

Yesterday, Google’s recent China dilemma seemed to come to a head: faced with the threat that the Chinese government was considering the revocation of its Internet Content Provider license, Google apparently came to the conclusion that a presence in China was too important after all, and decided to change course once again.

On the Official Google Blog, Google’s Chief Legal Officer David Drummond wrote:

We currently automatically redirect everyone using Google.cn to Google.com.hk, our Hong Kong search engine. This redirect, which offers unfiltered search in simplified Chinese, has been working well for our users and for Google. However, it’s clear from conversations we have had with Chinese government officials that they find the redirect unacceptable—and that if we continue redirecting users our Internet Content Provider license will not be renewed (it’s up for renewal on June 30). Without an ICP license, we can’t operate a commercial website like Google.cn—so Google would effectively go dark in China.

In an effort to appease the Chinese government, Google will force users who go to google.cn to proactively click on a link to google.com.hk to conduct web searches. “We are therefore hopeful that our license will be renewed on this basis
so we can continue to offer our Chinese users services via Google.cn
,” Drummond stated.

The operative word: “hopeful.” Back in March, when Google announced its first “new approach“, Drummond wrote:

We believe this new approach of providing uncensored search in simplified Chinese from Google.com.hk
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…

Hope” didn’t do a lot of good then, and it’s quite unclear whether or not Google’s latest new approach will pass muster either. But that should be the least of the company’s worries. Google’s really big strategic problem: it has finally recognized that it was never in a position of power, and its steady backtracking sends a very clear message to the Chinese government. That message: we’ll do whatever you want, but hope you’ll cut us a little bit of slack at some point.

Unfortunately, Google has really created a mess for itself here. When I first wrote about Google’s threat to leave China, I observed:

If the Chinese government stands firm, as it is likely to do, Google can follow through
with its threat to leave China while saving face with shareholders and consumers who still believe “do no evil” holds some meaning. Win-win
for Google management perhaps.

Of course, it’s clear that Google doesn’t have the will to leave China, and now that Google has made it clear that it was merely bluffing, it has only strengthened the hand of the Chinese government. That will almost certainly complicate its attempt to build a dominant position in what will one day likely be the world’s largest consumer market.

China is generally regarded as a difficult place for foreign companies to gain a foothold, and even though that has been true for Google, it hadn’t done the worst job imaginable. But building on what it has in China will only be more difficult now, as there can be little doubt that Google’s relationship with the Chinese government will be tepid at best. And in China, a company’s relationship with the government is often crucially important.

As we have seen, making mistakes is easy when dealing with foreign markets, and Google provides the perfect case study for just how big these mistakes can be. The question now is: will Google continue making mistakes, or will it learn from the ones it has already made? Its future may depend on the answer.

Photo credit: dok1 via Flickr.