Preston Gralla

Microsoft bets big on China...and loses

March 26, 2010 1:48 PM EDT
Microsoft is betting that its decision to continue to censor Bing in China will pay off big. But this is a bet Microsoft can't win. The company should follow Google's lead and stop cooperating with China's censors not just for moral reasons, but business ones as well.

Microsoft has made it abundantly clear it will continue to do the Chinese government's bidding by censoring search results in Bing. With Google essentially departing the search market in China, Microsoft clearly thinks it has a lot to gain.

In fact, though, it has a lot to lose. Bing has nearly no market share in China. Even the state-controlled China Daily newspaper, which gives favorable press to Microsoft because of the company's agreeing to censorship, admits that Bing's search share is under one percent in China. Craig Mundie, chief research and strategy officer for Microsoft, told the China Daily that "Microsoft is committed to stay," in China, and added that he believed that Bing will gain market share because of Google's departure.

But any market share it gains will be insignificant. The Chinese search engine Baidu is dominant and will continue to remain so, at least in part because of its strong ties to the Chinese government. Hong Bo, a consultant with 5G, a Beijing consultancy, said to the New York Times about Baidu, "If the government wants something removed, it will do it immediately."

Any miniscule gains Bing may see in China will be more than offset by losses in the rest of the world, particularly in the U.S., because of Microsoft's cooperation with the Chinese government. The PR fallout has already started, and will only get worse. Several days ago, at Congressional hearings, Microsoft was hammered because of its cooperation with China. In fact, intense anger at Microsoft is about the only bipartisanship you can find in Washington these days. Rep. Chris Smith, a Republican from New Jersey, said of Microsoft, "They need to get on the right side of human rights rather than enabling tyranny, which they're doing right now."

Expect more Congressional hearings and bipartisan anger aimed at Microsoft. According to the Christian Science Monitor Senator Dick Durban, a Democrat from Illinois

wants to pass a law that would "require Internet companies to take reasonable steps to protect human rights." And if they don't, he says, those companies could eventually face criminal charges.
Whether the law passes or not, Microsoft will be a big loser because of the poor publicity it's getting.

Ironically, all this is coming at a time when Bing has been gaining market share. According to comScore, Microsoft had risen to ahve 11.5% share of the search market in February, continuing its steady climb. Microsoft's acquiescence to the Chinese government demands for censorship will endanger its continuing growth because of the fallout from the company's decision to continue cooperating.

It's time for Microsoft to follow Google's lead. It's not just the right thing to do morally --- it would be good for Microsoft's bottom line as well.