- Associated Press - Friday, July 9, 2010

BEIJING (AP) - China renewed Google’s license to operate a website, preserving the search giant’s toehold in the world’s most populous country after the company gave up an attempt to skirt Beijing’s censorship practices.

Google said Friday that Chinese officials had approved its Internet content provider, or ICP, license but gave no details of what services it would offer.

Renewal had been in question after Google began automatically redirecting users in China to an uncensored Hong Kong search site. But the company dismantled the virtual bridge to Hong Kong last week after regulators objected to the sleight of hand and threatened to revoke its Internet license.

Users are still only a single step away from the Hong Kong service. They can click anywhere on the Google.cn page to go to Hong Kong, a subtle change that could still be enough to persuade mainland Chinese to use a competing search site instead.

And while mainland users can get uncensored Google results from Hong Kong for even controversial topics, users will not always be able to click through the links because of government filters.

“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’s top lawyer, David Drummond, said in a statement.

The company’s one-sentence statement gave no details. Google spokeswoman Courtney Hohne said information on what services Google will offer in China would be released in coming weeks.

There was no immediate statement on the website of China’s Internet regulator, the Ministry of Industry and Information Technology.

Google said in January it no longer wanted to comply with rules requiring it to censor search results after it traced hacking attacks to China. The announcement embarrassed Chinese leaders, prompting questions about whether they might punish the company by shutting it out of China, where Google has a lucrative advertising business and a fledgling mobile phone operation.

In March, Google shut down its mainland China-based site, which had excluded from its results sites that could not be reached from China. It redirected users to the uncensored Hong Kong site instead.

Google opted not to leave China completely so it could pursue its commercial ambitions _ a music service, its mobile phone business, a Beijing development center and a staff to sell ads for the Chinese-language version of its U.S. search engine.

And to keep the license, it stopped the automatic redirection.

Losing the China license would have been a significant setback for Google, even though China will only account for an estimated $250 million to $600 million of the company’s projected $28 billion in revenue this year. China already has nearly 400 million Web surfers and usage is expected to rise for years to come.

For Beijing, the renewal tones down a high-profile dispute at a time when American and European businesses are complaining about unfair treatment by the government and saying China has become less welcoming to foreign business.

“Basically, this was a smart move on the part of the Chinese government to kind of defuse the situation,” said Paul Denlinger, an Internet consultant for startups. He said that the friction between Google and China will not disappear but will temporarily dissipate.

The outright departure of Google from China would have hurt an Internet industry that communist leaders see as a source of future prosperity and that they are depending on foreign companies to help develop. Chinese fans of Google left an avalanche of messages on Internet billboards pleading with the company not to leave.

Beijing encourages Internet use for business and education but tries to block material deemed subversive or pornographic. Government task forces monitor foreign websites and use a system that routes traffic through a handful of state-controlled gateways to shut off access to those run by dissidents or human rights and Tibet activists. China has routinely blocked parts of Google’s service such as YouTube.

Still, the existence of Web filters is widely known, and many Chinese users know technical tricks to get around them.

The license renewal leaves Google in China but with its commercial future unclear.

The China-based Google.cn site lets users click a tab to go to Google’s uncensored Hong Kong search site. But industry analysts say that without a China-based search function, users will defect to local rival Baidu Inc., and advertisers trying to reach a mainland audience won’t use the Hong Kong site.

Unlike in the United States, Google is not the dominant player in China, with some 30 percent of the search market to Baidu’s 60 percent. That’s down from about 35 percent at the end of 2009, just before Google decided to stop censoring search results in China.

Advertising spending will shift to Baidu and other Chinese sites, predicted Vincent Kobler, managing director of EmporioAsia Leo Burnett, which buys online advertising space for clients including Marriott International. He said the firm was recommending clients switch to Baidu.

“Even last year before this crisis, Baidu always was in a stronger position,” Kobler said. “In terms of media buying, customers in general, despite this news of the ICP license being renewed, are still more comfortable with Baidu.”

Google said its license expires in 2012 but must be renewed annually.

The license renewal means Google will have a chance to see if it can build other lines of business in China: advertising, mapping and the Android operating system for mobile phones.

Things to look out for in coming months include whether Google services are featured on new mobile phones in China, Denlinger said. Motorola had replaced Google functions with Baidu and Google postponed the launch of two Android phones with a Chinese carrier due to the dispute.

“It will be interesting to see if Google can stop the slow bleeding,” Denlinger said.

Google Inc., based in Mountain View, Calif., opened its China site in 2006 to attract more Chinese users after the government filters slowed their access to its main U.S. site, Google.com.

Google’s efforts to win renewal appeared to be late and not very energetic, said T.R. Harrington, chief executive officer of Darwin Marketing in Shanghai. He said the new Google.cn home page put up late last month appeared very rough compared with other Google sites.

“They were playing a game of chicken,” Harrington said. “It seemed like Google was trying to get pushed out rather than leave on their own.”


Associated Press writers Charles Hutzler and Cara Anna contributed to this report.

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