January 18, 2010
By Jessica Guynn
INTERNET
The Internet giant has won admiration from politicians, Silicon Valley business leaders and even its sharpest critics for threatening to bail out of the Asian nation.
A message of support for Google was left at a makeshift shrine outside its headquarters in Beijing. Google says it has a 31% market share in China, a distant second behind Baidu Inc. (Nelson Ching / Bloomberg / January 14, 2010)
The decision by Google Inc. to stand up to censorship in China is a marked turnaround from just a few years ago, when the Internet giant agreed to gag parts of its search engine to enter the lucrative China market.
Google's threat to bolt from the Asian nation has brought praise from politicians and Silicon Valley business leaders, along with many of the human-rights activists who had condemned the company for going along with China's restrictions on Internet access.
Whether Google's reversal sprang from political idealism or corporate realism, the Mountain View, Calif., company seems intent on winning back the glow of goodwill.
"The China situation was a ticking time bomb for Google's reputation, and they were smart to detonate it on their terms," said crisis management expert Eric Dezenhall.
Google, which had come under harsh criticism after its 2006 move into China, is widely known for its good deeds. It is donating $1 million and technology to relief organizations in Haiti to aid rescue efforts in the aftermath of the deadly magnitude 7.0 earthquake there. During climate talks in Copenhagen, it introduced a free tool to monitor deforestation around the world. Other free services track the spread of flu viruses and energy consumption.
But, as its influence and wealth swelled, so did concerns and unease with the company's rapid growth.
It has been accused of ignoring the rights of authors as it builds a massive digital library and not adequately protecting consumers' privacy with Gmail and other services. It has been derided for crushing old-media companies and disrupting other industries and amassing too much power in the online advertising market. Its actions have drawn attention from regulators in the U.S. and Europe.
The decision to enter China posed the greatest risk to its reputation. With more than 360 million Internet users, one of the largest and fastest-growing Internet audiences in the world, China is tempting for U.S. technology companies.
It's also treacherous. Yahoo Inc. ultimately withdrew from China after it provided information to Chinese authorities that led to the arrest of journalists. Yahoo sold its China business to Alibaba Group in 2005, while acquiring a 39% stake in Alibaba.
That Google would go along with China's restriction on Internet access, dubbed the "Great Firewall of China," drew strong condemnation from human-rights activists. It was also a source of controversy within Google itself.
At the time, the company consulted a cavalcade of China experts and ultimately concluded that the benefits of providing Chinese users with access to its search engine outweighed its concerns over censoring some results. But co-founder Sergey Brin, whose family left the Soviet Union when he was a child, was deeply ambivalent. "Google executives were always of two minds about that decision," said John Battelle, who covered the rise of Google in his 2005 book "The Search."
Google made significant investments in China, opening a research-and-development center, hiring key executives and a staff of hundreds. But Google never experienced the explosive growth in China that it did in the U.S. It struggled to compete with Baidu Inc., claiming a 31% market share, a distant second behind its Chinese competitor. Estimates put Google's China revenue last year at about $300 million, a fraction of its worldwide sales of $22 billion.
At the same time, Google said, it grew increasingly uneasy about the broad crackdown on Internet freedom in China and a series of confrontations with Chinese officials. The final straw, it said, was the hacking of information stored on its servers that targeted human-rights activists.
Google spokesman Gabriel Stricker said that the company had always been clear about monitoring conditions in China and that it would reconsider its "approach" if it were unable to give the Chinese people "increased access to information."
Rep. Chris Smith (R-N.J.) said Google began signaling a change of heart in May 2008 when it said it would support legislation that pushes for more Internet freedom in China.
Google had previously joined other technology companies in opposing the bill.
Smith said David Drummond, Google's senior vice president and chief legal officer, paid him a visit in July, as did another Google representative last week, to express support for the Global Online Freedom Act with some "tweaks."
"This is a very big game changer when the leading search engine in the world all of a sudden has had enough," Smith said.
Google faces an uphill battle in seeking support for its new stance from other U.S. companies and from the U.S. government. The State Department on Friday said it would file a formal complaint with Chinese officials this week and ask for an investigation into the hacking attacks. But U.S. trade policy supports investment in China, Battelle said.
Siva Vaidhyanathan, associate professor of media studies and law at the University of Virginia who is writing a book about the Internet giant, cautioned that Google wasn't so much taking a stand against censorship as a stand against cyber-spying.
"Google deserves tremendous thanks and applause for standing up for the integrity of the Internet. But the free-speech part of this story is merely window dressing. We have to be careful about what we applaud Google for."
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