For a few days last week, Penn’s School of Engineering and Applied Science was off limits to web-searchers in China.
Government censors—and search powerhouse Google—were responsible.

Even as Google rides a wave of support for its decision to fight the government and protect the privacy of its users here in the U.S., the company is drawing the ire of human rights activists, journalists and some of its longtime supporters for its recent decision to allow Chinese officials to control the content of the new Google.cn site in that country.

In return for the opportunity to launch the Google.cn site, the company agreed to censor its search and news offerings in accordance with “local Chinese laws and regulations.” That means that Chinese users of the site won’t be able to look up topics the Chinese government considers threatening—which could mean anything from democracy to Tibet, from alcohol to the spiritual Falun Gong movement.

“Within the framework of the U.S., it makes sense to object to the handing over of private information,” says Dan Hunter, a Wharton assistant professor of legal studies and business ethics. “The difficulty that Google got into with China is that they don’t have the luxury of Constitutional protections and libertarian polices. The individual does not count for as much in China.”

It was a mention of the Falun Gong somewhere on the Penn Engineering server that caused Google.cn to block access to the entire school’s site, according to news reports. And while Google.cn has since corrected the problem, and also opened up access to other sites that were originally blocked (including Budweiser.com and collegehumor.com), the criticism of the company—and the censorship policy—remains.

It’s uncharted territory for a company that boasts an informal corporate motto of, “Don’t Be Evil.”

“What they’re demonstrating here is that … it’s hard not to be evil sometimes,” Hunter says. “It’s kind of an empty statement, really. It doesn’t really affect what they do in the long run, and they have to handle some difficult policy questions.”

What once-idealistic Google has run up against, says Hunter, is a classic problem for many public companies. At the end of the day, executives have to keep shareholders happy. That means seizing markets that can bring big profits.

There is no market bigger than China, where the population is projected to reach 1.37 billion by 2010. And because Google’s top competitors, Yahoo and Microsoft, are already in China, the company ran the risk of losing its market dominance on the basis of a single decision.

“In the end, it comes down to a corporate decision,” he says. “In the end, for them as a publicly traded company to ignore a market as big as China would be almost impossible. The problem for them is not that they’re not making enough money right now. They’re making plenty of money. But if they cede that marketplace to another big rival, the rival could use that to leapfrog Google again.”

Google has explained its decision by saying that launching its site in China, even a censored version, gives the nation’s people more access to information than they would otherwise have. Hunter says the company’s leaders may even believe that to be true.

But he suspects market pressures were just as important.

“They were confronted with a difficult choice,” Hunter says. “Do they not do any business there at all? Well, there’s a lot of money to be made there. It’s an interesting dilemma for them.”

Additionally, Hunter says, it’s not likely that the decision—controversial as it may be now—will have any long-term bad effects for Google. These kinds of issues come and go in the world of online privacy, and more often than not, they are quickly forgotten.

Long after the issue of censorship falls off the public radar, Hunter suspects, Google will be reaping profits in China.

“Everyone forgets,” Hunter says. “My guess is that will be the case here.”