How will Microsoft, Yahoo respond to Google's China challenge?

Analysts say Google rivals may face user criticism if they don't fight Chinese censorship

Google's move to challenge Chinese censorship demands and threaten to pull its business from the country could pressure search rivals like Microsoft and Yahoo to follow suit.

Analysts said Google should generate positive reviews from its challenge to the Chinese government, which could prove a problem for rivals that still censor search results for users in the country.

"It depends on what ultimately happens," said Dan Olds, an analyst at Gabriel Consulting Group. "If Google pulls out of China, I would like to think it would give other companies the guts to stand up to it and any other country that wants to censor content and use them to settle scores with critics."

Google announced late last night that a major attack launched against its network from within China had forced it to consider pulling its business out of the country. After the attack, which was aimed at exposing the Google Gmail accounts of Chinese human rights activists, the search vendor said it was in the process of reconsidering earlier agreements with the government to censor search results of users in China.

In an e-mail to Computerworld , a Microsoft spokesman said the company has found no evidence that its network was hacked in China. "We have no indication that any of our mail properties have been compromised," he wrote. The spokesman, however, would not respond to questions about whether Google's move will prompt it to also consider pulling out of China.

Yahoo did not respond to a request for comment.

After noting that Google's image should benefit from its challenge to the Chinese government, industry observers said they were closely watching for subsequent moves by Microsoft and Yahoo, which run the second and third most popular search engines worldwide.

Rob Enderle, an analyst at the Enderle Group, said it will now be harder for other companies to go along with China's high-handed tactics.

"I think we would all appreciate it if companies more often drew lines in the sand protecting their customers even against large hostile governments," said Enderle. "This is the way that the Obama administration would like all companies to behave -- put doing what is right ahead of what is financially expedient. It would be nice if this was a trend but with executives focused on quarterly results and the bottom line that is doubtful."

And while Google's rivals will likely face increasing pressure to deal more harshly with the Chinese government, they may also find themselves in a position to pick up some of Google's market share -- and advertising revenues -- in the country.

"This gives Google's rivals a big business opportunity," said Olds. "With Google out of the market, it gives them a clearer path to win a big chunk of the market -- but at what cost?" The cost could be measured in good will and reputation, he added.

"This may prevent further investment and transfer of other technology to China," said Jim McGregor, an analyst with In-Stat. "This is likely going to cause others to proceed cautiously, if at all."

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