Friday, July 09, 2010

A turbulent year for Google

Google has been through a turbulent period this year. Following hacking attempts, the search giant created consternation within China after it announced it was unwilling to censor search results. After a war of words, mostly issued from China's state media, Google moved its search operations to Hong Kong by way of a redirect. However the redirect did not please authorities and Google changed its approach by creating a 'landing page' with links to its Hong Kong based servers. This came as Google reapplied for its licence needed to continue operating in China.

It has not only been Chinese authorities that have been angered by Google. In Europe, the US and several other parts of the world there was outrage after it was revealed that Google had collected WiFi data as it had gathered images for its Street View service. Street View had already created controversy with many people citing privacy issues, but the collection of SSID information as the Google cars passed WiFi points raised deeper concerns. Just as social networking site Facebook raised worries over privacy, so did Google Buzz which was launched earlier this year.

All the concerns about Google has severely affected its stock. Google's shares have fallen more than 30% since the beginning of the year to close at $436.07 on Nasdaq on Tuesday after ending 2009 at $626.75. Google have yet to announce their second quarter profits. However JPMorgan Securities are not optimistic and have cut the price target on shares of Google Inc by 11% to $566 and lowered its second-quarter outlook. Its decision is partly due to the discontinuation of the online sales of the company's Nexus One smartphones [AP].

It has not all been bad news for Google. Android's share of the US smartphone market surged 4% between February and May, according to research outfit comScore, putting Google on the verge of overtaking Microsoft for the number three spot behind RIM BlackBerry and Apple. Android still remains behind other mobile systems, but it is fast catching up.

Google's Chrome Web browser has reached 7.24% of the world-wide browser market in June and is the fastest-growing program for surfing the Web, according to data from, which tracks Web usage. Google says Chrome had more than 70 million active users in May, up from 30 million in June 2009 [WSJ].

While only at the number three spot Google has yet to create major concern amongst the other major players, but that may soon change. The take-up of both Android phones and Google Chrome is growing. Android take-up is tempered by people's contracts and the cost of phones however. The relatively recent launch of several high-end Android models has increased the profile of Google's mobile operating system. But with many consumers tied into 18 and 24 month contracts, which they may have taken less than a year ago, it may be some time before people change to Android and affect the market share.

Where Google Android wins over the Apple iPhone and WinMo 7 is on open sourcing. Apple offers an extensive selection of apps. However Apple CEO Steve Jobs is often selective on what he allows to be used on the iPhone. Users have downloaded some 2 billion applications from its ever-expanding library of 100,000 applications but some users complain that some applications are missing. Some banned apps are undoubtedly tasteless, but there have been accusation that Apple are overzealous in its censoring of apps.

The omission of Adobe's Flash has also been seen as spiteful by some and a curtailing of the online experience. Many videos will only play on Flash and some WiFi access points require Flash to enable logging on.

WinMo 7 has a limited number of applications and many are costly. When Sony Ericsson launched its Xperia X1 18 months ago it used the WinMo 6 and came with several panels. The panels which serve as applications were limited however. A YouTube panel did not come for several months and a Twitter panel caused crashes for many users. The Skype panel was one of the few free and stable applications available along with the Facebook panel, but many panels were little more than cosmetic wallpapers. As WinMo 7 launched, Microsoft announced it would not facilitate copy and paste claiming users do not need to do this on a mobile device.

All these issues have prompted many manufacturers to move to Android. Sony Ericsson dropped Windows Mobile and launched the X10 with Android. Samsung, Motorola, LG and Acer have all released a number of mobile phones using Android and HTC only make Android based devices. HTC, a Taiwanese company, initially made smartphones based primarily on Microsoft's Windows Mobile software, but in 2009 it began to shift its focus away from Windows Mobile devices to devices based on the Android operating system.

However, while Google's Android is growing in popularity it is causing huge problems for expats attempting to use their devices in China. In mid June many people began to notice that they were unable to download apps in the Market and access Gmail on Android phones became a problem [Sinosplice].

China now has its own Android-based system (Ophone) with its own market (Mmarket). Official Android phones are not available in China and like so many sites in the country, blocks can prevent access. While YouTube is blocked China's strictly controlled Youku is available. Facebook is unavailable but Kaixin, a Chinese clone, is freely accessible. Many fear Google Maps may also be blocked after authorities ruled that online mapping providers must apply for special licences [FT].

Without a VPN [Virtual Private Connection], an Android phone is virtually useless in China, especially since many applications are Internet based. Most Google services were highly restricted in China even before the advent of Android. And despite promises made by the Chinese government that it would not thwart Google's mobile operations, the opposite appears to be true [Google PRC Report].

Penetrating the Internet market in China is difficult enough, given the restrictions placed on companies. But for companies like Google it is particularly hard. Many services, such as its search engine, YouTube and Picasa, are based on openness, the spread of ideas and opinion. This is in direct conflict with Chinese authorities who strictly control the flow of information.

Google also faces further scrutiny into its WiFi gaffe. In the US congress are to launch a probe [BBC] after particular criticism over its collection of data [BBC]. Australian authorities have also launched an investigation [BBC] as have several European countries. These investigations may take some time, and is a heavy cloud over the company's reputation. Ironically, in Hong Kong [part of China but operating under different governmental rules] where Street View data was also collected, Google has not received so much flack. In fact, although there were discussions with authorities, Google has been allowed to continue collecting pictures after giving assurances no further WiFi data would be gathered [Xinhuanet]

Google is unlikely to collapse, but 2010 may prove to be a year the company would rather forget. While Chrome and Android are undoubted growing successes, the fall in stocks is significant and any more bad news from China won't help. On Thursday Google was still awaiting a decision on whether it would retain its licence to continue operating web-based services in China, though Google's CEO Eric Schmidt remained positive [Business Week]. However, Google announced on Friday that China had renewed its licence [CNN / BBC]. "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 said in a blogpost. This was perhaps a silver lining on an otherwise dark and heavy cloud.

tvnewswatch, London, UK

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