Freedom of speech is a fundamental American right. And the Internet has done more to promote the exercise of free speech than any other innovation in our lifetimes. But what happens when an American Internet service provider does business in countries that restrict free speech? What compromises does it make, and do those compromises create gaps between stakeholder expectations and the company's behavior?
Google, which has operated in China since 2006, recently announced that it was considering withdrawing from the country in response to Chinese security attacks and government censorship. What impact does that potentially have on Google's revenues, reputation and operational integrity?
In China, Google flexes some foreign policy muscle
By Rob Pegoraro
Washington Post Staff Writer
Sunday, January 24, 2010; G01
It's not every day, week, month or year that one American company essentially threatens to fire an entire country -- much less one with its own stock of nuclear weapons.
But Google not only suggested that it would have to walk away from its business in the People's Republic of China, it did so in a Jan. 12 blog post condemning a list of Chinese offenses including censorship and attempted break-ins of its computer systems.
"These attacks and the surveillance they have uncovered -- combined with the attempts over the past year to further limit free speech on the Web -- have led us to conclude that we should review the feasibility of our business operations in China," Google declared in the post. "We have decided we are no longer willing to continue censoring our results on Google.cn," its China-based search site.
That's a far more public rebuke than anything the U.S. government has said in public. Next to that, Secretary of State Hillary Rodham Clinton's speech on Internet freedom Thursday reads like a diplomatic (understandably so) attempt to catch up to Google's lead. (And China's Foreign Ministry predictably blasted Clinton's speech, saying that the United States should "cease using so-called Internet freedom to make groundless accusations against China.")
Google's newfound militancy cannot be what the Mountain View, Calif., Internet firm had in mind when it agreed to do business in China in 2006.
At the time, Google took a lot of criticism for agreeing to censorship by Beijing's Communist rulers of Google.cn. In response, it argued that it could make more of the Web's information available to Chinese users with a locally based search engine, and that disclosing when censorship forced it to withhold relevant results -- it follows a similar practice in the United States after removing a YouTube video in response to claims of copyright infringement-- lent transparency to its operation.
(Considering that China's Web filtering apparently operates by making users think that an un-"wholesome" site doesn't exist or isn't working, that second argument seems a fair point.)
Further, Google said it would keep its Gmail and Blogger services based offshore to protect Chinese users of those sites.
But Google might not have realized then that the Chinese government would alter the bargain by demanding stricter censorship or blocking other Google services -- or that Chinese hackers would launch a widespread, well-orchestrated series of attacks on its computers and those of other U.S. companies to break into the Gmail accounts of Chinese human rights activists.
There aren't many things foreign companies can do to stop the abuses of another country's government, but suggesting that the other country's money is no good has to be among the most severe responses possible.
By way of comparison, when Western computer manufacturers didn't want to install "Green Dam" Web filtering software, they did not publicly threaten to boycott the Chinese market -- and, with help from protests by Chinese users, Beijing backed down on that requirement.
Is Google mashing down the panic button just to distract people from worrying about the security of its own systems? That's possible.
But if you analyze its moves in strict business terms, it's easier to conclude that Google is acting against its own shareholders' interests. The company may have a minority of the search market in China, but even that current business is substantial. The potential rewards for staying in the market are far larger. Neither is something to toss aside lightly.
What comes next? Who knows? Google says it has not yet removed the filters on Google.cn and continues to talk with Beijing about its next move. But why would that regime relent on such a fundamental instrument of state control? Is a shunning by Google that much of a punishment?
That's what makes Google's move -- essentially, setting aside business concerns to act more like a fourth branch of government with its own foreign policy -- so bold. Especially if you compare it with the past conduct of tech companies in the Untied States that complied with warrantless wiretap requests.
And yet there's something just a bit odd about our most public defender of human rights being an unelected, for-profit company that happens to run an e-mail service in which computers scan your messages to match them up with ads.
If you were waiting for confirmation that Google takes your privacy and its "don't be evil" commandment seriously, this act of defiance may be all that you'd hoped for. But please don't treat it as a reason to hand all your business over to Google; applaud the company if you wish, but don't let yourself forget how to fire it.
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8 comments:
What is actually happening here is that Google is losing the internet search engine war in China to Baidu, which eagerly complies with Chinese censorship regulations. Google is not actually a trailblazing leader in democracy, that is purely the brand they wish to push. They are simply a business enterprise. That said, Google is making a very risky move in the eyes of stockholders. If the Chinese government were to react favorably, perhaps Google could take over the market and pass Baidu on numbers. If this seemingly values founded maneuver fails, however, Google will have lost the entirety of its Chinese base and thus money. It's a big risk, but perhaps necessary in Google's conquest for world domination. Stakeholders include the Chinese people who do use it, the Chinese government that profits from taxes, Google's stockholders, and China in general as far as free-speech is concerned. I think Google's messaging is okay, its defending its brand and doesn't want to be too obvious in its real business reason behind the threat as it wants to retain its image of pro-"the small guy". Success can be seen only if Google stays in China and its numbers increase.
Originally, I was surprised that Google publicly announced that the company was wanting to leave China. It almost forced the US government and Sec. Hilary Clinton to respond in agreement. (She & the US Gov. did turn it to look like this was just a tip of the start to a new platform for Sec. Clinton to speak on when she travels.) There are many involved in this situation that have many stakeholders in high places. Google wants to protect its Chinese users while the US and Chinese government deep, detailed and entangled involvement.
A US-based company is trying to equate their beliefs onto a country that historically never has had the same beliefs. It does look bad on Google for appearing to not be respectable to the wishes of the country. It would be similar to not caring about their social and religious customs when traveling to China. It doesn't help to have seem like a "loud, overbearing, US company" when other US companies are trying to expand into China.
Google's biggest problem is not their under-performing product or their moral compass. Their biggest problem is the Chinese government's hacking and spying.
Google can't risk the revelation of any proprietary information to the Chinese government. Any information gained through hacking would be immediately given to Google's competitors.
If the goal of issues management is to create competitive advantage, it looks like Google is working overtime to slap the Chinese government's hand right out of their business.
Google is acting unfavorably against its own shareholders' interests. Associated Press (AP) writers Joe McDonald and Michael Liedtke point out in an article yesterday that "the Chinese sales force is important to Google because most of the company's revenue in China comes from online ads sold on Google's U.S. Web site, Google.com. Analysts say keeping Chinese advertisers happy would be more difficult if Google closes its sales office in the country and tries to connect with the customers from abroad." Thus, it may be more rewarding for Google to retain its Chinese-language search engine, Google.cn.
In December, a targeted attack on Google's corporate infrastructure stemmed from China. However, this does not minimize China's desire for wealthy, innovative tech companies equivalent to Google. "The Google dispute could heighten disputes within the Communist Party over how to balance security and economic development," says McDonald and Liedtke.
It will be interesting to see how this script will unfold. Negotiations to keep Google's research center in China are underway. China's 1.3 billion consumers make up a large market. Nevertheless, Google reportedly had a net income of almost $2 billion, for the fourth quarter. This may lead some to believe that Google will have no problem remaining the powerful, innovative, valuable, and profitable company if it ceases business operations with China's Internet market.
For many, what's endearing about Google is that it doesn't conduct business like most big multinationals. Most big multinationals, for example, wouldn't go to war against China's freedom-of-speech policies like what Google has done. I am sure this has caused many stakeholders to believe this move was not overburdened with logic.
For some Google shareholders (those who put a higher premium on profits than on democratic rights) will see this as a commercial example of cutting off your nose to spite your face, because it is not remotely clear how a withdrawal from China by Google would enhance the privacy of Chinese human rights activists.
This issue is in the formation stage of the issues management lifecycle. Whereas Google, may be attempting to define and set boundaries based on internal security breaches; meanwhile demonstrate its operational integrity as part of its message.
Google's statement is certainly a big bold gesture that shines a light on systematic infringement of freedom of expression in that country. However, Google doesn't dominate the search market there; it's the number two with a 31% share, way behind Baidu's 64%. So Google's discovery that there are moral imperatives which outweigh the profit-motive should not be as expensive as it might have been. Overall, this issue is a true symbolic clash of culture, politics and economic globalism.
I have mixed feelings about this decision.
As an individual (that does not have stock with Google), I find this move interesting...It's a powerful way to make a statement regarding your company's views on censorship and privacy. If this were a CSR move, then perhaps the Chinese users of Google should be considered, as well as the heady idealist notions at Google Corp.
However, if I were a Google stockholder, I am not sure that I could overlook the abandoned opportunities in China. Furthermore, I might be irritated that Google is mixing business decisions with decisions regarding censorship in a foreign market (although, I admit in this situation, the lines are certainly blurred).
This decision addresses some of unique challenges which arise in global marketplace - respect of foreign laws and regulations, human rights issues, business growth and profitability, and questions of censorship and government control.
This is a really interesting move on Google's part. Because of the company's status and reach, many groups of stakeholders hold stock in its decisions.
In making the decision to post a blog entry condemning China's Internet censorship and surveillance, the company risks alienating the most populated country in the world. China could lose its business venture, Google.cn, which it has surely invested millions, if not billions, of dollars in. A loss of revenue from a break in the relationship with the Chinese government may end up costing shareholders.
Google almost surely placed its consumers (those who use Google search, email accounts and other applications) above others in making this decision. Google's consumers are mainly technologically inclined adults who pay attention to and value concepts like freedom of expression. I'm sure many were pleased that Google took a stand against what many would consider an infringement of basic rights.
However, Google created a tough predicament for its other stakeholder groups. Google puts its peer companies in a limbo situation with this blog post. Now Yahoo and other Internet companies will be forced to assess and possibly espouse their position on this issue. If they say nothing, Google is the good guy standing up for human rights. If they stand with Google, they (like Google) risk a profitable business relationship with China.
This Google stance also creates a tough situation for the U.S. government. The article notes that Google is taking a position that the government has yet to take condemning China's practices. The government is sure to receive pressure from groups to take a position following Google's.
On the flip side, huge companies like Google also come with huge muscle. It may take the withdrawal of a major technology company like Google to withdraw from the country (or create a coalition of major companies to withdraw from the country) for the government to ease some of its harsh restrictions on freedom of speech and expression. Either way, it was a risky move by Google that could spark nearly as many unintended consequences as positive outcomes.
When looking at the situation from the perspective of a shareholder, my first thought was that the shareholders would be happy. After all Google's motto is 'don't be evil' and I remember a lot of people were mad at Google when it first decided to go into China and agreed to be restricted. They thought it conflicted with Google's motto and values. However, looking at it from a business perspective of the shareholders I can see why they are angry. Google will most likely lose money if they continue to fight with the Chinese government.
It is a difficult situation and it will be interesting to see what happens.
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