Inside Google

San Francisco, CA — In a surprise announcement late Tuesday, Google Inc. said it may turn its back on the huge Chinese market after a sophisticated cyber attack on the e-mail accounts of human rights advocates in the Asian nation.

In response to the digital assault, the Mountain View Internet giant said it will stop censoring search results in the country, reversing a widely criticized compromise it first made when launching in China.

Google stopped short of accusing the Chinese government of orchestrating or encouraging the security breach, but the victims of the attacks and Google’s emphatic response both underscored the likelihood in the minds of many observers.

"That’s the strong implication," said Greg Sterling, founding principal of Sterling Market Intelligence.

An unusually candid blog post by David Drummond, Google’s chief legal officer, said that 20 other large companies were also attacked. Google is in the process of notifying those businesses and working with unspecified U.S. authorities on a wider investigation.

Drummond said the evidence so far suggests the main goal was to access information from the Gmail accounts of Chinese human rights activists, though that effort appears to have largely failed.

Dozens of accounts

The internal investigation, however, led to a separate discovery that dozens of Gmail accounts in the United States, Europe and China that belong to advocates of human rights in China had been regularly accessed by third parties, probably through phishing scams or malware.

"These attacks and the surveillance they have uncovered – combined with the attempts over the past year to further limit free speech on the Web – have led us to conclude that we should review the feasibility of our business operations in China," Drummond said.

Specifically, he said, Google will, over the next few weeks, stop censoring its search results in the country, a compromise it made with the government to gain a foothold in the rapidly developing nation. It plans to hold discussions with Chinese authorities about whether it can do so legally, but Drummond acknowledged that it may not be possible.

"We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China," he said. "The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences."

It’s a risky game of chicken, given the enormous market opportunity that China represents. The company has struggled to gain ground against China’s leading search engine, Baidu. Google commands less than 20 percent of the market, compared with Baidu’s more than 75 percent.

Expanding market

But the country is the largest Internet audience in the world, with various reports pegging the number of online users at 350 million. It’s also one of the fastest expanding mobile markets, a key growth area for Google as an increasing number of smart phones operate on its Android platform.

"If it goes south and China doesn’t capitulate, then they’re basically cutting themselves off from one of the fastest-growing economies in the world," said Rob Enderle, an analyst with the Enderle Group.

Whatever the business consequences, the move was praised by consumer and human rights groups on Tuesday. Since the 2006 introduction of Google.cn, the company has been widely criticized for agreeing to block certain search results.

Some have dubbed the country’s censorship efforts, which apply to Yahoo Inc. and Microsoft Corp.’s search engines too, the "Great Firewall of China." Users of Google.cn in China generally couldn’t look at images of the 1989 Tiananmen Square protests, dig up information about Tibet’s Dalai Lama or access the Web site for journalism watchdog organization Reporters Without Borders, according to reports.

"While Google should never have agreed to censor search results in China in the first place, it is doing the right thing by ending the practice now," said John Simpson of Consumer Watchdog in Los Angeles. "The company should be commended."

‘Bold’ step

The Center for Democracy & Technology called it a "bold and difficult step."

"No company should be forced to operate under government threat to its core values or to the rights and safety of its users," said Leslie Harris, president of the Washington public interest group, in a statement.

Google declined to discuss whether the Chinese government might have been involved in the attacks.

The company said in a statement: "We’re not going to speculate, because we don’t know. What’s clear is that the environment in which we are operating in terms of an open Internet is not improving in China."

E-mail James Temple at [email protected].