Thursday, January 14, 2010

Google dead in China?

WSJ reports on the decision process at Google. There are still a number of open questions:

1. What were Google's prospects in China? Are they really hopelessly behind Baidu? I've seen market share estimates ranging from 15-30% (no agreement even on the sign of the derivative!), and also the claim that the most sophisticated users (i.e., the ones with the most disposable income in the long run) tended to use Google. Perhaps no reason to throw in the towel -- but then why did Kai Fu Lee resign in September? Was it just the opportunity to run his own investment fund? (Here is an earlier post on Baidu, with a talk given by founder Robin Li.)

2. How serious is the state-sponsored security threat to companies operating in China? Did this play a big role in Google's decision? Coordinated attacks by state-run intelligence are significantly harder to deal with than ordinary hackers or even corporate espionage. An intelligence agency only has to turn a few key employees to get at important source code that necessarily would have to be available to researchers and operations people at Google China. It would be difficult to justify the risks of operating in an environment that hostile. (Needless to say, it would be long-run detrimental for China to create an environment that hostile to foreign companies.) On the other hand, snooping around for information about a few email users is hardly a threat of the same proportions.

WSJ: Google Inc.'s startling threat to withdraw from China was an intensely personal decision, drawing its celebrated founders and other top executives into a debate over the right way to confront the issues of censorship and cyber security.

The blog post Tuesday that revealed Google's very public response to what it called a "highly sophisticated and targeted attack on our corporate infrastructure originating from China" was crafted over a period of weeks, with heavy involvement from Google's co-founders, Larry Page and Sergey Brin.

For the two men, China has always been a sensitive topic. Mr. Brin has long confided in friends and Google colleagues of his ambivalence in doing business in China, noting that his early childhood in Russia exacerbated the moral dilemma of cooperating with government censorship, people who have spoken to him said. Over the years, Mr. Brin has served as Google's unofficial corporate conscience, the protector of its motto "Don't be Evil."

The investigation into the cyber intrusion began weeks ago, although how Google detected it remains unclear. As Google employees gathered more evidence they believed linked the attack to China and Chinese authorities, Chief Executive Eric Schmidt, along with Messrs. Page and Brin, began discussing how they should respond, entering into an intense debate over whether it was better to stay in China and do what they can to change the regime from within, or whether to leave, according to people familiar with the discussions. A Google spokesman said Messrs. Page, Brin and Schmidt wouldn't comment.

Mr. Schmidt made the argument he long has, according to these people, namely that it is moral to do business in China in an effort to try to open up the regime. Mr. Brin strenuously argued the other side, namely that the company had done enough trying and that it could no longer justify censoring its search results.

How the debate ultimately resolved itself remains unclear. The three ultimately agreed they should disclose the attack publicly, trying to break with what they saw as a conspiratorial culture of companies keeping silent about attacks of this nature, according to one person familiar with the matter.

Soon, Google's vice president of public policy and communications, Rachel Whetstone, began crafting and revising a number of versions of a possible statement the company planned to release publicly, these people said, sharing it with the three.

The top three agreed that in addition to discussing the attack, the blog post should contain some language about human rights, the strongest statement of which is a clause in the penultimate paragraph of the post.

The section said they had reached the decision to re-evaluate their business in China after considering the attacks "combined with the attempts over the past year to further limit free speech on the web."

Concerned about potential retribution against Google employees in China, the founders and their advisors agreed to include a line saying that the move was "driven by our executives in the United States, without the knowledge or involvement of our employees in China."

... Veteran observers of trade between the countries suggest that Google, and the U.S. generally, has little leverage to press China to back down on Internet censorship or other issues.

Some expressions of support for Google's position flowed in from around the world, including from consumers in China as well as some U.S. companies—including rival Yahoo Inc.—and politicians. Secretary of State Hillary Clinton Tuesday issued a statement saying Google's allegations "raise very serious concerns and questions," and that "we look to the Chinese government for an explanation."

Odds are high Google could be left largely on its own in taking concrete steps to confront the Chinese government. Veteran observers of trade between the countries suggest that Google, and the U.S. generally, has very little leverage to press China to back down on Internet censorship or other issues.

Besides the Web site, Google has a range of other business initiatives and partnerships in China that could be affected by its decision. By snubbing Chinese authorities so publicly, the company risks government retaliation against itself or its partners. The decision also affects local competitors who could benefit from any retreat. Shares of Google's biggest Chinese rival, Baidu Inc., surged following the news.

Google's blog post Tuesday said cyber-attacks on its infrastructure resulted in "the theft of intellectual property," stating that it found evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human-rights activists.

Again, snooping on activists and stealing core IP are two very different activities. Which was more disturbing to Google? Previous discussion here.

“Don’t Be Evil” always did sound a bit to me like tikkun olam, or repairing the world (see this profile of Brin and Page). Not sure whether CEO Schmidt is down with that ;-)


Yan Shen said...

Eric Schmidt is a joke. He spoke at our UPenn commencement ceremony, where he did nothing more than mouth off platitudes about working hard and accomplishing your goals in life.
And he threw in a few lines about how companies should embrace moral and ethical responsibilities in today's society. I'm sure the guy wouldn't think twice about turning a blind eye to anything that happened as long as there was a dollar in it to be made. I guess this is the unfortunate reality we live in and have to deal with.

g said...

posted at end of earlier thread, Zero Hedge has weighed in on this:

Google’s Mysterious Threat To Pull Out Of China - Is A Covert War Brewing Between The U.S. And China?

Saul said...

Gathering Clouds

Google’s reasons for leaving China aren’t as pure as they seem.

Dawg_from_Hell said...

"Mr. Schmidt made the argument he long has, according to these people, namely that it is moral to do business in China in an effort to try to open up the regime."

Heck! That position is particularly disingenuous. How do they propose to "open up the regime" when they themselves are censored to at least the same extent as Baidu and other search players there?

Thras said...

I imagine that the Chinese hacking is related to Google recent switch to https default "always on" for its accounts. There was a nice presentation at Defcon 1-2 years ago that showed just how easy it was to break into a Gmail account that uses http over an insecure connection. I wouldn't be surprised if this attack is exactly what was used.

China's response? I think China should buy Google.

George Shen said...

making a stand against censorship? give me a break, why not just admit the defeat in competition? google was never close to baidu in china. this nice "exit strategy" seems to score more political points than anything else. i am not crying for you, google....

any way to think of this, if google is making tons of tons of RMB in china, would they do what they did? i thought people wouldn't be that naive...but obviously i am wrong.

Yan Shen said...

I love how I've yet to hear any Chinese person just come out and say, censorship is wrong.

Are the Chinese such a weak people that they can't bring themselves to criticize their own country?

In America, you can criticize the Iraq war or Obama's nationalized health care and you can still be considered a patriotic American.

In China, there seems to be this mindless mentality that criticizing the government is somehow anti-Chinese. I guess all these cliches you hear about the mindless conformity in China are right on the mark.

I get the feeling that most Chinese and Chinese America would sooner bite off their own arm than admit that my god China is light years behind the civilized world in upholding basic civil and political liberties.

Yan Shen said...

It's kind of funny though. Most Chinese Americans have the luxury of living in an open and free society, where freedom of speech and freedom of information isn't censored. Perhaps this is why so many of them are so apathetic on the issue of censorship. They don't suffer the consequences of its negative effects and so can afford to appeal to their own misguided sense of nationalism.

The people who normally complain the loudest are people in China who are fed up with the Communist government and who suffer the most from its authoritarianism.

Figures huh?

George Shen said...

oh, please, don't know what you are talking about. Censorship is something i am totalling against. but this is business....has nothing to do with censorship. think for a second, if google is racking billions in china, would they be leaving or not? please answer this question!!!

different issue, if you want to debate on political reform and social progress, then fine. but using google leaving china as an argument for that, it's cheap shot.

Yan Shen said...

George. I think everyone is smart enough to realize that most decisions are heavily business oriented. You aren't particularly smart or enlightened by realizing this. :)

I'm sure a small part of this is motivated by how the Communist government is behaving. Otherwise, why would Google contemplate leaving a market that has potential future growth? Sure, they probably weren't going to displace Baidu as the dominant search engine. But I read reports that their market share was increasing year after year to roughly 30% currently in China, and that 2% of their overall revenue was coming from China. Small no doubt, but if there was 0 moral concern whatosoever, why would they leave the market?

Maybe this decision is 90% business oriented and 10% ethical? Who knows.

Yan Shen said...

Sure, if Google was making far more money in China they wouldn't leave the market or censor results. I think that's obvious.

But if the Chinese government wasn't a complete asshole either, I doubt they would think about leaving China.

And no, using google as an example isn't a cheap shot. Even though most people realize Google's motives are mostly financially motivated, the fact that they're standing up to the Chinese government at all is a good thing. From what I've read the Chinese government was taken by surprise by Google's brashness.

Yan Shen said...

And George, it's funny how you say you are totally against censorship. I am guessing you've never publicly argued against it?

That's the thing with Chinese Americans. Most of them say they're for human rights and against censorship. But they never criticize the Chinese government publicly or defend those principles. The only time I ever find out that my fellow Chinese Americans are against censorship is when I force the issue upon them.

George Shen said...

"The people who normally complain the loudest are people in China who are fed up with the Communist government and who suffer the most from its authoritarianism."

where did you learn this propaganda…oh, right, the same mass media which brainwashed you while you grow up......fine. don't know where you got your stats, but if you care to look at the Gallup poll, majority of Chinese people are actually quite happy with their government. of course, people including me are fed up with corruptions and censorship but overall the Chinese are proud that the country is making progress by leaps and bounds, quite unlike the states that have been reduced to a nation of whiners but always at the forefront of criticizing other countries….how about let’s worry about the business of this country first?

Yan Shen said...

Do you understand English? I didn't say most Chinese are upset with the way the country is headed. I read a recent poll that said that 86% of Chinese were happy with the direction the country is heading.

What I said was, out of the people who do complain, most are in China. Learn some English before you criticize me.

George Shen said...

yan, please stop arguements based on your assumptions....when i was in tai'an'men square protesting the gov in 1989, you are probably still in diapers?

Yan Shen said...

The only reason people are content at the moment is because the government is bringing about many economic and social improvements for the people. I hope you realize this.

When China becomes far more developed economically and socially, there is no way that this kind of repression can exist.

You're just another one of the same George. You've lived in America long enough to realize that in America people think independently and for themselves. The media operates independently from the government. The only mass media brainwashing is that in China. I love how Chinese people who are ignorant of how open the American media is try to criticize the US media. I wonder what they think of the Chinese media then?

os said...

Shen, maybe you should have known more Chinese-American before make comments here obscurely refer to the blogger. As far as I can say, most Chinese-American don't have so claimed nationalism sense about china, they are basically american. they spent some time on china issues is not different from euro-descendants pay attention to european affairs. And they may have different opinions about things happen in china, I don't see any reason they are wrong(or not honesty )if they don't agree with you.

I know a Chinese American who grown up in china, now a teaching faculty in a US university, her political viewpoints, about many things of the world, even go further than many American, in fact the same as right wing if I don't mistake the spectrum there.

Lastly, maybe you should show some basic respect to people living in china, if you really care them.

Yan Shen said...

So tell me George, why is criticizing the Communist party anti-Chinese? This is a mentality I fail to understand. In America, when you criticize Obama, you're not considered anti-American.

Do you realize that I am only against the Communist party? That I love China as a country and as a people? That China in the past was one of the greatest civilizations in history? Stop being so emotional and nationalistic. The Communist party does not represent China or the will of the people. It is great that they've brought up many economic and social improvements for many people. But so far, they have brought about very little civil or political freedoms.

Yan Shen said...

George, I show plenty of respect to the Chinese people. I show no respect to the Communist party or to people who defend the Communist party unequivocally.

Sure, I realize that the Chinese intelligentsia are extremely open minded and embrace a variety of opinions. But sadly, the majority of the Chinese masses seem to buy into Communist propaganda too much.

George Shen said...

have a short memory, look no further than the marching drumbeat by mass media before the iraq war??? you think you live in a true democracy where people control the gov ,right? wake up, it's bunch of special interest and lobbyists and politicians who are really controlling this country. your argument about china people being complacent about their gov because they are better off economically can be made for this country as well. if the economy isn't going well, middle-class loses the social and financial well being, you see a revolution here as well.

Steve Hsu said...

Yan Shen, please adopt a more civil tone in your discussions. This is not a blog for kids.

George Shen said...

os, where and when did i show disrespect to people in china? i grew up in china. i don't know where you got this nonsense. please make some good arguments before you even care to debate on issues. the google thing is about business, period....nothing about freedom, it's capitalism. you lose, you out.

Yan Shen said...

Stop bringing up the your irrelevant examples about American governance George.

I'm not talking about to what extent an individual can influence public policy. I'm talking about the civil and political liberties that are afforded to the citizens of a country.

To Steve, I apologize for my lack of civility, though in all fairness you should direct that comment to some of the other posters on your blog as well.

Steve Hsu said...

"To Steve, I apologize for my lack of civility, though in all fairness you should direct that comment to some of the other posters on your blog as well."

Yes, the comment applies to everyone. Let's keep this discussion civil, please.

George Shen said...

we are still talking about Google, aren't we, yan? how about let's focus on the topic. the real reason is that google lost the search engine war in china. baidu was and has been and still is the market leader who leaves google in dust. that's the real reason.

thanks, steve for reminding us that civility is necessary for debate. i am all for good arguments, for it or against it.

Yan Shen said...

George, if you read my earlier post, I think I made it clear that most decisions are primarily motivated by financial and business concerns. However, I pointed out that if there were no ethical qualms whatsoever, I doubted that Google would contemplate abandoning the Chinese market altogether. If I had to give a rough assessment, I'd say that this particular decision is 90-95% motivated by financial concerns and perhaps 5-10% motivated by moral qualms against the way the Communist government behaves. I know that's just imprecise speculation, but I think you get my point.

The bigger point here is that regardless of how pure Google's motives really are, the issue caught the Chinese government by surprise and is bringing the issue of censorship and freedom of speech to light.

There is another point that I've repeatedly stated that frustrates me. The Communist party does not equate with China or the Chinese people. Criticizing the Communist party is not anti-Chinese. And yet so many people fail to distinguish between criticism of the Communist party and criticism of China as a country. This is what I was referring to as being the product of a misguided sense of nationalism.

George Shen said...

yan, if you believe that the real motivation of goolge's leaving china is basic economics then we don't have big difference. many people are trying to confuse the issues by pointing fingers. and i am totally questioning google's decision. in my view, this is very BAD political and business decision.
if they really care about censorship and media freedom, they should stay engaged in china by being strong and tough, not running away like loser. they should advocate to chinese gov policy wise in lawful and legal means. if you really know the oriental culture, doing things like google did is a big NO NO in business dealing. if you want to influence people, you have to engage them, not leave them.

google made a horrible decision in my view. btw, it has nothing to do with nationalism or patriotism. different issue.

Yan Shen said...

One other point. Democracy isn't the only form of governance that embraces human rights. Take Hong Kong for example. It is clearly not a liberal democracy in terms of style of governance. What is great about Hong Kong though is that civil and political liberties are respected.

I'm not arguing for liberal democracy here. I'm arguing for upholding civil and political freedoms. Those two aren't one and the same. If the Communist party tolerated freedom of speech and allowed access to freedom of information and protected the civil and political liberties of its people, I really wouldn't care too much that the style of governance was more authoritarian than Western style democracy.
The term benevolent dictatorship immediately comes to mind.

Yan Shen said...

George, I can understand the argument you are making. I have heard it made before and I think it is a compelling one.

I really don't know which method is best for engaging the Chinese government and promoting openness and reform.

I am just really frustrated at being labelled anti-Chinese every time I criticize the Chinese government. The only reason I am so vocal is because I believe that China has great potential as a country, in terms of attaining cultural, scientific, technological, and economic prestige. And I believe that the current environment in China is preventing China from reaching its potential.

Maybe this is cultural and generational issue, but some younger Chinese Americans look at how far China is behind countries in the West or Japan and South Korea and feel a certain sense of shame, anger, and frustration. To us, the notion of embracing an open society seems almost trivial and it is extremely frustrating to see how few people in the Chinese government can understand where we're coming from.

George Shen said...

yan, i believe you are a very young guy. true? you have to put things into perspective, put the chinese modern history into perspective. when i was in college and marching against the gov in 1989, i didn't really have that. all i was thinking is just like what's on your mind now. now i am older and i look things in retrospective - where was china 50 years ago, or 20 years ago, i think progress is being made. the central gov is weaker. local gov bodies have more involvement of avg. citizens. the progress is there. you can argue if it is enough. but you can't reasonably say that china is going backwards. it is moving forward slowly, not as fast as you and i like to see.

i expect the central gov will be more weaken and eventually local and provincial gov and people have more sayings about their daily life and politics. there will be more freedom....and i would suggest you to have a historical view on this issue. maybe you will be optimistic.

are we off topic again? sorry, steve. this is about google.

George Shen said...

yan, i never made the argument that you are anti-china or anti-chinese. because i don't have such impression. i just think that your view is very single dimensional.

Yan Shen said...

I think it's great that China is making many improvements, especially in terms of bringing about economic and social advances for most people.

I was in China for a few weeks in the summer of 2006 with my family and I had a great time. I just think that we can't get too complacent with the progress that China has made so far. We should really remember that it's way behind in many other areas. How China develops will probably be one of the biggest influencing factors guiding the course of human civilization during the 21st century. I really think that point is under-emphasized. This isn't just about China, it's about the development of the entire world. An open China which embraces human rights and responsibilities will undoubtedly alter the entire global infrastructure, politically, economically, scientifically, and technologically.

To answer your question, I just turned 23, if that counts as being relatively young... And my apologies to you for getting frustrated at you earlier.

George Shen said...

yan, i am 42. your point below is well taken - "Maybe this is cultural and generational issue, but some younger Chinese Americans look at how far China is behind countries in the West or Japan and South Korea and feel a certain sense of shame, anger, and frustration. To us, the notion of embracing an open society seems almost trivial and it is extremely frustrating to see how few people in the Chinese government can understand where we're coming from."
we do have different perspective if not generational.
another point i want to make is that with all the technoledge knowhow and best minds in the world, how come google losing a cyber war to chinese gov? this itself got to be the biggest news. by leaving china, are they admitting that the best and brightest minds can't compete bunch of mail hacking and news censoring bureaucrats? ?? I would like to know your and steve’s take on that.

Yan Shen said...

Perhaps Steve is better equipped to address that particular issue.

To Steve, I just have one question. Were you born in America or China? I think I might've read some poster saying that you grew up in Iowa. I'm just curious.

George Shen said...

yan, i invite you to read this piece on FT.

Ripple effects rock Celestial Kingdom's net generation

"In recent years, the net has provided a curious twist to modern Chinese society and its mixture of authoritarianism and a market economy. Most people who spend time with Chinese university students acquire the same impressions: they will be earnest, smart as a whip and very interested in the outside world. The internet is their main window on that world. And there are 300m Chinese web users. How come a big chunk are not hopping mad about censorship?

The reason is that the censors' "Great Firewall of China" is actually shot through with holes. Sophisticated filters exist to identify controversial words, while legions of monitors keep an eye on chat-rooms. But if you are really determined to access a site, it is relatively easy to do so, using either a proxy or a virtual private network (VPN).

The overall effect of the web censorship is to prevent widespread dissemination of damaging news about pollution or tainted food, but it does not stop the engaged and curious minority from gaining information.

Some young Chinese see it as a badge of honour to dodge the restrictions, and say the foreign media exaggerate the level of censorship. "We eventually get to find out what we want," the blogger Foxhuo said last summer. "Westerners would be wrong to think that China has no freedom at all." Nothing about this reality will be changed if Google does shut up shop in Beijing and close its Chinese search engine. With a VPN, Chinese internet users can even search for sensitive content using Google's US website."

it's true censorship is in place that workarounds are available too. one thing i observe is that young educated chinese are far more knowledgeable about the US or the world than young americans know about china or the world. isn't it ironic with all the information we have in this country and the censorshop in china?

Yan Shen said...

You make a good point George. Though I was actually already aware that tech-savvy users in China could easily get around the censorship. My cousin in Shanghai showed me how he was able to do it, when I visited in 2006 during the summer.

I agree though that the American media doesn't report more about the ways Chinese users are circumventing the regulations.

But I think less technologically capable users still are hurt by the lack of open information. And ultimately, as a matter of principle, I am still upset that the government censors information at all, even if it is easy to get around the limitations.

hanum said...

IT security consultancy Sophos said the number of companyfocused internet attacks was doubling each year, potentially costing companies billions of pounds through piracy, spying, sabotage and blackmail.

anonymous said...

How ironic. It would appear that the level of awareness in young chinese about americans outpaces that of the young americans about the chinese. And Google wants to ride in and free them from the shackles of ignorance. Riiiiiggggght. Follow the money. They will be kissing the butts of the chinese authorities soon and begging to be allowed to plunder ... er exploit available market opportunities.

charliebrown said...

You would be surprised how gullible people are. They fall for this all the time from our "trust me I'm from the government" politicians.

ridam_lovm_lov said...

google will dead again in each country soon

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