Now that Google has said it will stop censoring search results on its Chinese Web site, a key question is whether rivals Yahoo and Microsoft will do the same.
In the wake of a major cyberattack last month, Google said Tuesday that it willand may pull out of China entirely.
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"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all," Google said in a blog posting. "We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China."
If Google were to pull out, it could offer an opportunity for Yahoo and Microsoft to gain share in a huge market if they are willing to continue censoring their sites.
At the same time, doing so would likely subject either company to enormous bad publicity and a potential backlash elsewhere. Historically, the companies have all justified their moves as saying they are necessary to do business in China and argued that engagement is better than isolation.
We've asked both Yahoo and Microsoft to comment on whether they plan to change policy and will update as soon as we get a response. We're also checking whether Google's move will have any impact at Baidu--the leading search site in China.
And, speaking of Baidu, some are already posting their two cents on twitter, suggesting that it is Baidu's domination of Google in China, as opposed to the censorship issue that would be behind any pullout. I don't know the economics of the China search market that well, but it would seem to me that even a distant No. 2 spot in such a huge market would be worth keeping, all things being equal.
As for Microsoft's other online businesses in China, the company has about 8 million Hotmail accounts in China, although none of the data is stored there, according to a source familiar with the company's operations.
"We certainly think it is better for us to be present around the world rather than not," Smith said. "I emphatically think it is good for us to be offering these services. Part of being present is the obligation to comply with local law."
What do you think Microsoft and Yahoo should do? And, is Google pulling out over morals or market share?