Google’s very public dispute with China has everyone confused. First Google accused China of hacking into their servers but wait Google did not necessarily mean China but that hackers were from China. In fact hacking was identified as coming from servers belonging to a couple of schools in Shanghai, but wait may be not, may be some clever hacker, who could be from anywhere, has disguised their origin by commandeering those servers.
Google then announced that they are going to stop censoring the contents flowing through their servers in China and would no longer obey China’s laws related to the control of information being access by China’s netizens. Testimony before Congress seems to indicate that Google will definitely get out of China. Well, maybe not said CEO Eric Schmidt because he was confident of a positive outcome from quiet negotiation with Beijing--negotiations that Beijing has denied taking place.
Bill Gates couldn’t understand what the fuss was all about. If a company is going to operate in China, the company is expected to obey Chinese laws. That’s the way it has been for Microsoft. If you don’t wish to obey the local laws, then yes, you better get out.
Somehow the issue seems more complicated from Google’s point of view. Whether at Google’s request or not, the US government seems ready to come to Google’s aid, by threatening to file a complaint with the World Trade Organization (WTO) accusing China of protectionism. Since China’s laws on cyberspace apply to all Internet enterprises and not just against Google or just foreign companies, it is a head scratcher as to how the U.S. can make such a complaint stick.
It’s possible, I suppose, for the US to insist on China opening the Internet to the same degree that the US is open so that Google can be more successful instead of being merely a distant second in market share in China. But that would be based on a rather dubious premise that having to filter the content puts Google at a disadvantage.
Finally Kai-fu Lee, former head of Google China, spoke up and shed some light to this matter. Lee was lured away from Microsoft in 2005 to right the floundering Google ship in China. By most accounts, he was going a good job as Google was slowly gaining on Baidu, the market leader in search in China. He unexpectedly resigned in September last year.
While attending the Abu Dhabi Media Summit last week Lee was asked about China’s Internet industry. While he would not comment directly on Google in China, he said, “For an American company to succeed in China, it needs to do the following: first, you have to have an empowered local team; second, you need to humbly listen to the local user; third, you need to move fast to give users what they want; and fourth you need to have a longer-term outlook and not be too greedy in wanting to make money on day one.”
Google isn’t the only one to stumble in China. Facebook, eBay, Amazon and Yahoo all did not achieve dominant market share in China comparable to their success in the US. I suspect that all suffered from the same drawback. Namely, their not understanding the local market and not trusting their China team to seize the moment and make decisions without having to go through the corporate bureaucracy back home.
Lee was too diplomatic to ever admit that the frustration of lacking local empowerment was what caused him to seek greener pastures. But he certainly does understand the China market and potential. He has established Innovation Works to harness the energy of entrepreneurs inside China and nurture them into next generation Google’s.
Lee’s incubated start-ups will be participating in a home market of 350 million web surfers and Internet users and 680 million mobile phone users, both largest in the world and growing at double digit rates. In another 7 to 8 years, Lee expects the by then 800 million mobile phone users to access the Internet with their smart phones and that’s the market he wants to play in.
Surely CEO Schmidt has to be agonizing over the dilemma: can Google afford to dither and watch the world’s most dynamic market zip by?
After Google announced their move to Hongkong, I sent an updated commentary based on this blog to New America Media.
Google has just revealed that many countries have asked Google to remove contents. Of the countries that have asked Google to censor the contents, the United States came in 4th in frequency of requests.