The Untold Story of Google in China
10 July 2010A great deal is being made of Google’s just-received renewal of its Chinese internet content license, which allows the company to continue to operate (until further notice) without censoring its searches, if I understand properly and am being given accurate information by Google, by offering a “choice” splash page at the Chinese Google homepage.
Chinese nationals who go to this page are faced with a search box, and a choice below it, allowing them to jump to Google : Hong Kong, which is not (one hopes) censored.
This, on the face of it, is good. Everyone feels good. I do. You do. I bet the ruling Party folks in Beijing do, too.
There is just one problem: China has two separate agendas here, and only one of them has been addressed in literally all of the writing on this subject. Yes, the Chinese Communist Party insists on mind control over the Chinese people, preventing them from searching on any subjects it considers not in their interest, with Tiananmen Square being Exhibit A.
But there is another agenda item: China only wants its own Internet companies to prosper. Time after time, it has put barriers, speed bumps and road blocks in the way of non-Chinese companies trying to get somewhere in the Chinese market. In Google’s case, smart folks will remember when Google first came along, it was the clear choice for search, worldwide.
Google’s first problems with the government were not about censorship, they were about the government intentionally delaying Google search results, in order to give Baidu a speed advantage. Many studies have been done on this question, and inserting just a small – say a portion of a second – delay into server /search response, will tilt the competitive plain away from the slow site.
Because no one can complain about China and continue to do business there, Google very quietly complained about this treatment in the U.S. , and no one picked up on it. Google did server checks inside and outside China at the time, and concluded that their internal searches were being delayed by the government.
Can you imagine the U.S. government – or the German, French or Australian governments – intentionally harming the performance of a non – domestic company’s online operations, as a policy matter?
Think about it.
Even today, China proudly points to how Baidu has a larger search market fraction than Google, as though this is Google’s fault, and so they somehow matter less. Is this because Baidu is such an amazing engine? Or is it thanks to a government that, as GE’s CEO Jeff Immelt said in Italy last week, “doesn’t want us to win.”
While the rest of the world is celebrating Google getting its silly little content license, let’s ask a much better question. Are the smart guys behind the curtain in China happy to have this solution, knowing that adding another three to five seconds (vs. a fraction of a second previously) to every search will accelerate their prior program of delaying Google search results, and thereby handing market share even more quickly to Baidu?
The answer, in my opinion, is “Yes.” This way, it looks like capitalism and markets at work, with the Chinese champion winning, and without the embarrassment the country would have suffered if Google had just picked up and walked because of censorship. Now, Google loses, Baidu wins, and everything is perfect.
Unless you want the truth in China. Or unless you want to compete there fairly
I would be interested in informed comments, and please give your name when you comment.
2 Responses to “The Untold Story of Google in China”
July 12th, 2010 at 9:37 am
I covered Japan for Business Week during the early 1980s and for the Los Angeles Times during the early 1990s. The U.S. really cracked down on Japanese efforts to favor their local companies including companies in the critical communications and semiconductor sectors. Japan responded by allowing the U.S. more access to the market.
The U.S. is clearly a lot more hesitant to apply the same kind of pressure to China. The assumption has always been that our dependence on Chinese capital and the importance of their market reduces our leverage. Yet, China is far more dependent on the U.S. market than the reverse. Many observers say China will change over time. Yet, if anything, China’s leverage is likely to increase as it moves up the value chain.
With Japan, the U.S. simply passed trade bills that created strong incentives for Japan to change. The U.S. may hav little choice but to make a similar move. There is the danger of a trade war, of course. And these kinds of moves must be done without the ridiculous theatrics that accompanies the measures against Japan and which raised nationalist ire against the U.S. But failing to face up to this issue now will make it tougher in the future on a range of issues from market access to the protection of intellectual property. Of course China will begin to protect IP when its companies start having technology to protect. But that may be too late.
When even the CEO of General Electric starts to complain about China in public, you know that we are reaching a critical point. I only hope whatever measures our country takes, they are well thought out and not framed in the emotional terms of a trade war but are framed as incentives for China to change.
August 20th, 2010 at 9:04 am
Over time these silly little games will become irrelevant. Innovation and creativity beat the heavy hand of dull bureaucrats every time.