Android, Yahoo Take Hits in Google-China Slugfest

Google’s latest salvo in its dispute with China came Tuesday, with reports that it’s holding off unveiling two new Android phones in that country.

However, this move may hurt Google more than it does China, which has a plethora of Android phones from different manufacturers.

The hacker attacks on Google and Gmail accounts have led foreign journalists in China to switch to Yahoo mail, which may pose problems of its own, as Yahoo was reportedly one of the companies hacked, and its email system is vulnerable.

Yahoo has also been sucked into the Google-China brawl, having drawn fire for its support of Google from its Chinese partner, Alibaba, which owns and runs Yahoo China.

You Don’t Get My Toys

On Tuesday, one day before their scheduled China launch, Google reportedly scrapped plans to unveil two Android phones, one from Motorola and the other from Samsung. Google had tapped China Unicom, the second largest wireless carrier in China, to distribute those phones.

The cancellation is Google’s way of drawing a line in the sand, contended Carl Howe, director of anywhere consumer research at the Yankee Group.

“It’s a symbolic move to show they’re reducing their interests in China,” he told TechNewsWorld. “It’s not intended to have a big impact.”

Perhaps — but the move may have an impact on Google. China Unicom currently carries the iPhone in China, and canceling the launch of the Android phones may cost Google the chance to take on Apple’s powerhouse in the world’s largest market. It may also cost Google goodwill with its partners.

“If you’re a platform vendor, punishing your platform partners because of a dispute with a local government isn’t wise,” pointed out Rob Enderle, principal analyst at the Enderle Group. “Google could appear untrustworthy from the standpoint of the carrier and cellphone manufacturers in the region, which could effectively lock them out of China.”

Google’s move could also cost it ground in the China market, which is notoriously difficult to penetrate. That’s not just because China’s largest wireless carrier, China Mobile, has its own Android phone, the O-Phone, and many smaller local phone manufacturers are making their own Android devices. It’s also because Android is an open system and therefore can be used and modified by anyone — and, being an open system, Google can’t restrict access to the latest version of Android when it’s released.

Google did not respond to requests for comment by press time.

Switching to Yahoo Mail

Meanwhile, foreign journalists in China had their Gmail accounts hacked. This has apparently led many to switch to Yahoo Mail. However, Yahoo Mail is no safer than Gmail, and has been hacked repeatedly — the most notorious incident being the intrusion into Sarah Palin’s account in September 2008, when she was the Republican candidate for vice president of the U.S.

Further, Yahoo was among the large companies that Google investigations found had been attacked by Chinese hackers.

A Google search using the term “Yahoo Mail Hacked” turned up several complaints in 2008 and 2009 about users’ accounts being hacked. It also turned up two results giving instructions on how to hack into Yahoo Mail.

It’s well known that public email accounts are easy to break into, Enderle said.

“These services trade off security for ease of use, and are vulnerable to attack,” he told TechNewsWorld.

Yahoo Drawn In

After news of the Google-China brawl became public, Yahoo came out in support of Google’s stance. That sparked a dispute with its Chinese partner Alibaba, in which it holds a 40 percent stake. Alibaba described Yahoo’s move as “reckless” and said it didn’t share Yahoo’s view.

“I think this will hurt Yahoo, but it probably decided it’s better to be a team player on the American team,” the Yankee Group’s Howe pointed out.

Yahoo is damned if it does side with fellow American company and Internet search engine provider Google, and damned if it doesn’t.

“Basically, you have a battle between Chinese government policies and ideologies and those of the West,” Enderle pointed out. “Companies are not set up to fight fights like this, and getting in the middle can be especially painful.”

Yahoo may have yet another motive for weighing in on Google’s side in the battle. “Yahoo is struggling for anything that looks like good press,” Enderle said.

However, it may end up the loser in this brawl.

“I think stepping into this mess was ill-advised because Yahoo can’t really help, and it will create avoidable contention in Alibaba,” Enderle said.

Yahoo did not respond to requests for comment by press time.

Can Baidu Pick Up the Pieces?

Google, Yahoo and Microsoft have made relatively little headway in China, which is dominated by Chinese search engine provider Baidu. Could Google’s dispute with China pave the way for Baidu to strengthen its position?

Possibly, but it may not be able to pick up all the pieces. For one thing, there may be turmoil in its halls. Two senior executives have left the Chinese search engine company in the past 10 days, pointing to possible disputes within the company, according to the Financial Times. They are Peng Ye, Baidu’s chief operating officer, who stepped down Jan. 8, and Li Yinan, its chief technology officer, who left Jan. 18.

Second, Baidu is having problems attracting ads. At its last earnings conference in October, the company warned that fourth-quarter revenues would fall by up to 7 percent because some advertisers did not want to use its new platform, “Phoenix Nest.”

Meanwhile, smaller search engines, such as Soso and Sougou, are reported to have gained market share. Further, Alibaba is reportedly planning to launch its own search engine through its consumer site, Taobao.

“The real question is, can the average Chinese user live without Google?” asked the Yankee Group’s Howe. “The average consumer might be quite happy to switch search engines once Google pulls out. That was always Google’s fear — that, if they didn’t play along with the Chinese government, they would lose the market.”

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