Google Gets Tough on Values With China
Gunther
Let me count the reasons why I love Google: its speedy search engine, the oodles of free storage on Gmail, Google Maps that get me where I need to go, YouTube for video sharing and time-wasting, and Google Analytics to obsess over my blog readership.
But seriously folks, Google’s recent threat to withdraw from China, rather than accept censorship, is a breathtaking example of corporate values at work and a landmark moment in the history of corporate responsibility. It’s the biggest and boldest statement any American company has ever made about doing business in China.
As Rebecca MacKinnon, an Open Society fellow and expert on both China and Internet freedom put it:
They are sending a very public message — which people in China are hearing — that the Chinese government’s approach to Internet regulation is unacceptable and poisonous. They are living up to their “Don’t be evil” motto - much mocked of late — and living up to their commitments to free speech and privacy as a member of the Global Network Initiative.
Because Google is one of the world’s best-known and most-admired brands, its action will also create pressure on Microsoft, GE, Wal-Mart and others to deal in a more ethical way with a country whose economic potential is so great that businesses typically turn away when China imprisons political activists, restricts religious freedom and strictly controls what its 1.3 billion people can read and see.
Remember that in China, censorship is literally a matter of life and death. This government won’t tell its people about the safety of their air and drinking water, the pollution in their rivers, workplace accidents, tainted foodstuffs or children who die in schools because building codes aren’t enforced.
Google’s top managers have struggled since 2005 about whether to enter China, and how. How could the company operate in a country with the world’s most pervasive Internet censorship apparatus while remaining to its mission to “organize the world’s information and make it universally accessible and useful”? China did more than block access to content online: It used the Internet to monitor, track down and punish dissidents. In 2005, journalist Shi Tao was sentenced to 10 years in prison, based in part on information provided by Yahoo. (In 2006, I wrote about Yahoo’s China problem for FORTUNE.com.) At about the same time, Microsoft at the government’s request abruptly shut down a blog on MSN by writer and activist Michael Anti.
Until now, Google reasoned that it was doing more good than harm in China. Its search results provide a marginally more diverse menu of ideas than those of Baidu, its big Chinese competitor, which has close ties to the government. To its credit, Google at least informs people who use its Chinese language search engine that they are getting incomplete results.
But what Google’s announcement described as a “highly sophisticated and targeted attack on our corporate infrastructure originating from China” was evidently too much for the company to bear.
Make no mistake: Google’s decision to reject censorship in China, which in all likelihood will mean that it will no longer be able to do business there, is going to cost the company a lot of money in the short run. Internet research firm EMarketer estimates the size of the search-related advertising market at about $1 billion, according to an analysis in PC World. Google has about a 30 percent share of the search business, which would give it $300 million in revenues. The potential, as China’s economy grows, is much greater, of course.
Conventional wisdom is that no company can walk away from that kind of money. Here’s a venture capitalist, in a revealing quote from The New York Times: “‘I don’t think anybody is going to run away from China,’ said Joe Schoendorf, a partner at Accel Partners, a Silicon Valley venture capital firm with a major presence in China. ‘Google has Microsoft on the ropes, and China is arguably the world’s most important market outside of the U.S. You don’t walk away from that on principle.’”
Of course, that’s exactly what Google is doing.
Similarly, The Wall Street Journal quotes Hal Sirkin, a senior partner at the Boston Consulting Group, saying:
China is such a huge growth opportunity that few U.S. companies will want to shut that door completely when there’s money to be made.
But you know what? I think Google’s get-tough stance with China will be good for its business.
Here’s my thinking. While others may scoff, Google takes its “Don’t be evil” motto seriously. Part of its identity is being a good company. The company is consistently at or near the top of FORTUNE’s Best Places to Work list. Google takes global warming more seriously than most companies; it has invested in solar, wind and geothermal energy companies as part of its efforts to bring down the costs of renewable energy. Just a few weeks ago, I wrote about how Google Earth helps indigenous people and environmental groups preserve forests. Google co-founder Sergey Brin, who grew up in Russia, knows first-hand what it means to live in a dictatorship, and has always been uneasy about Google’s China operations.
By taking on China, Google is reinforcing its identity as a different kind of company. It will attract and engage better employees. It has already enhanced its image and brand. All this is good for business. And in the long run — maybe the long, long run — Google may find itself able to do business in China on its terms because freedom eventually will trump repression.
In the meantime, some Chinese people are still laying wreaths outside of Google’s headquarters in Beijing.
Marc Gunther is a Contributing Editor at FORTUNE and Senior Writer at GreenBiz.com.
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