After a run-up in stock price, good press and public accolades, Google Inc. hit a rough patch this week.
The popular Internet company acknowledged a design flaw in its recently launched video service and released a version of its search engine in China that, at the behest of the Chinese government, filtered out some of the results on politically sensitive search terms such as "democracy" and "Taiwanese independence." That move drew charges that the company compromised its freedom-of-information ethics and tarnished its vaunted "Don't be evil" credo.
But China is the fastest-growing major market for the Internet, and many companies have had to make compromises to expand their businesses there. Last month, Microsoft Corp. shut down a Chinese journalist's political blog after the Chinese government complained about its content; Yahoo Inc. last year supplied the government information about a dissident journalist who was later incarcerated.
Google acknowledged struggling with the ethics of its decision but defended it, saying Google's entry into China would, on balance, increase information flow into the country.
"While removing search results is inconsistent with Google's mission, providing no information . . . is more inconsistent with our mission," Google senior policy counsel Andrew McLaughlin wrote in the company's e-mailed statement. McLaughlin said Google will not introduce its Web log or e-mail service in China until it can strike a "comfortable" balance between user interests and local regulations.
Critics said Google's capitulation to Beijing put it at odds with its own decision last week to resist a U.S. government subpoena that sought records of search terms to research pornography on the Internet. Google must be careful not to taint its own do-good corporate image with seemingly incompatible policies, they said.
"To their credit, Google does think very hard about these problems. [But] I think it was a mistake. . . . I think ultimately this will hurt Google," Columbia University law professor Timothy Wu said of Google's China policy. The company compromised its own goal of making the world's information searchable, and it has to be careful to preserve the public's trust, he said. "We generally trust Google, which is why people use it. It needs to keep that [that public trust] in these two areas of censorship and privacy."
Others say the ubiquity and depth of Google's databases make it a bigger target for criticism, whether the issue is small failures in its system or unpopular policy decisions.
"Part of it is envy; part of it is earned," said Rick Munarriz, an analyst with Motley Fool Inc. "It's kind of the backlash of 'you're too big.' "
Google now has 86.6 million monthly U.S. users, according to Nielsen-NetRatings. Success with services such as Google Maps awed users and touched off huge competition from Yahoo Inc. and America Online Inc., which have tried to replicate Google's success with online advertising. Google's problems with its new video site, which the company acknowledged this week was poorly designed, was its highest-profile stumble on a new, competitive product.
The company's stock closed at $433.49 on Friday, down from a high of $471.63 on Jan. 11.
Vulnerable to public opinion
Google is arguably more vulnerable to public opinion than conventional product companies, because its power -- and its money -- comes from its ability to capture something fleeting: the attention of consumers as they surf on the Internet, which is filled with free alternatives.
"I think it's really important for them to have a good ethical image," said Larry Ponemon, president and founder of the Ponemon Institute LLC, a research group on privacy and information security. "If you believe there are ethical issues in the background," whether it is a free-speech issue or a privacy concern, "those fears and doubts can change behavior," he said.
Resisting the U.S. government's subpoena proved a positive move for Google, said Ponemon, who issued a public opinion survey this week showing that 56 percent of people do not believe the company should release those data. Additionally, 89 percent of those surveyed said they operate under the assumption that their search inquiries were kept private.
Preserving that privacy may be a government issue beyond the corporate control, and that is a potential issue for all major Internet brands.
"They're holding so much personal information," said Xiao Qiang, a journalism professor at University of California at Berkeley. "No company can stand up to government policy alone."