Google CEO, Eric Schmidt, was recently on Charlie Rose talking about the China censorship issue. As you recall, Google threatened to pull out of the Mainland China market insinuating Chinese government backed hacking (no evidence to date) and threatening non-compliance with Chinese censorship laws. When China didn’t budge, Google shut down the search service on google.cn. Instead, on google.cn, there is a fake search box, and when a user clicks, it redirects the user to the Hong Kong google.com.hk site. According to this AP article, since then, Google dropped in revenue search share in China from 30.9% to 24.2% with bulk of the loss added to Baidu’s gain. Remember, this is revenue share, and given Google’s reach for the generally more English language capable Chinese population and Google’s over-all better monitization, Google’s user share within China is likely in the low teens or single digit percentage wise (my opinion).
We have written about the PR stunt Google pulled earlier in the year. (See Allen’s debunk: “Google vs. China – Good vs. Evil?“) It has been almost a year, and it is interesting to see Google’s current positioning on the issue. For your reference, below is a snippet of the Charlie Rose program transcript.
I suggest a read of the transcript now. For one, its more interesting to hear directly from Google. When reading mainstream Western media, the issue would have been dumbed down, polarized, sensationalized, and turned into black and white. Besides Schmidt’s false claim about Google’s market share, I mainly want to highlight one discrepancy in his comments. He talked about disagreement within Google to initially enter the Chinese market due to a “values” disagreement about censorship. That’s fair. At the very end of this transcript, you will read Schmidt talking about privacy being done differently between societies. Different governments around the world treat privacy differently. It’s again a “values” judgement. He cited pervasive surveillance U.K. as a “cultural” difference in privacy. When it comes to China doing censorship (and don’t forget, every country does censorship for one thing or another), it’s not about difference in “value” anymore; Google had no room for China to be “culturally” different. What hypocrites.
The Western media had their months of painting China as a bogeyman over this Google PR stunt. The damage to China has been done. As Allen’s article said, Google gained grounds in the West with human rights activists, democracy advocates, and China haters.
As I have written few articles ago, don’t forget Google’s rather malicious stance against China on the Diaoyutai issue: “According to Google, Diaoyutai belongs to Japan!” If someone within Baidu is reading this article, there is a simple competitive strategy to employ. When “google” is searched on Baidu, it ought to give special weight to this article in the page ranks. That 24.2% going further down is basically Baidu’s direct gain. I’ll remind readers to pass this along within China – Google should be required to make its information politically neutral. Schmidt acknowledged Google’s image suffered in China over this standoff. More damage is yet to be done, and Google only deserves so.
CHARLIE ROSE: I know you want to help me understand this, but tell me what the division was within Google over the China question.
ERIC SCHMIDT: Well, historically Larry and Sergey and I always debate everything.
CHARLIE ROSE: Right.
ERIC SCHMIDT: And within the company, there was always a question as to whether we should enter China.
CHARLIE ROSE: Yes.
ERIC SCHMIDT: And Sergey has always been concerned.
CHARLIE ROSE: Because of his own personal …
ERIC SCHMIDT: Because of his personal experience, but also just a values — it’s a values question …
CHARLIE ROSE: Right.
ERIC SCHMIDT: And we all agreed that legitimate people can disagree over those. So we agreed to enter China roughly five years ago, with an assumption that in fact our entry into China would make things better. Unfortunately, in the last five years, that did not — did not occur.
CHARLIE ROSE: And the logic — you got there, you could change the attitude towards — towards privacy.
ERIC SCHMIDT: This is the argument about whether you empower — it’s the trade-off of dealing with a government and the censorship laws which we do not care for, and the benefit of empowering the Chinese citizen, which we obviously want to do.
CHARLIE ROSE: Yes.
ERIC SCHMIDT: So, it is really the Chinese citizen and then the role of the government.
CHARLIE ROSE: So, what have you learned since you’ve been there before we get to the question of where you are now?
ERIC SCHMIDT: Well, I think the thing that you learn about China is one, it’s a very large and a very fast-growing country.
CHARLIE ROSE: Right.
ERIC SCHMIDT: The Chinese citizens are very, very clever, very creative, and the Chinese government is very, very powerful. So …
CHARLIE ROSE: So do you believe you didn’t change them by being there?
ERIC SCHMIDT: I think the evidence is clear that we, that our entry did not alter their censorship policies whatsoever.
CHARLIE ROSE: And did you come back on your hands and knees, basically, saying OK, we realize that you are going to have it your way, but …
ERIC SCHMIDT: That negotiating, Charlie, doesn’t work with the Chinese.
CHARLIE ROSE: What works with them?
ERIC SCHMIDT: The Chinese are very clever and they understand power and they understand — and they are very, very organized about what they need as a country.
CHARLIE ROSE: So what do they need as a country?
ERIC SCHMIDT: Well, they …
CHARLIE ROSE: They would need Google.
ERIC SCHMIDT: They would argue technology but they are very, very serious about enforcing these laws that we don’t like, and hence …
CHARLIE ROSE: What is behind it, do you think?
ERIC SCHMIDT: I think many people can imagine, it’s a single-party country. There is a concern over the history of the Cultural Revolution and the chaos that occurred at the time. Perhaps it’s Confucianism in some — in some variant, we don’t really know. But the fact of the matter is, it’s real.
CHARLIE ROSE: Did anybody from China among those people that you were negotiating with — sit down and say, Mr. Schmidt, you are a smart man. I mean, I realize you would have made billions of dollars and your company is, man, we admire here in China. But do you understand if you leave here, the size of the market you are leaving, did they make that argument to you?
ERIC SCHMIDT: Not directly but indirectly. But we understood that the decision we made was a principled decision, not a business decision.
CHARLIE ROSE: Right.
ERIC SCHMIDT: The business decision would be remain in China and put up with it.
CHARLIE ROSE: So — but so what happened to that principle?
ERIC SCHMIDT: The principle that we articulated is that there are things that Google does not want to be subject to. And the act of censorship that was — that is the law was something we just were uncomfortable with.
CHARLIE ROSE: OK, but where does it stand now?
ERIC SCHMIDT: Well, they are still doing it, and as a result we have moved to Hong Kong. And Hong Kong is not subject to that law because it’s — remember, it’s one country, two systems. So by moving to Hong Kong, the censorship is done by the Chinese government through something called the Great Firewall of China, which exists between Hong Kong and the mainland. In that, it forces them, if you will, to implement their policies as opposed to us.
CHARLIE ROSE: So, is that working for you as an alternative?
ERIC SCHMIDT: The effect of it is it blunts our success in China. And in fact, it was important for us to get this business license, which we were able to get renewed, thank goodness. Otherwise we wouldn’t be able to operate in China as a whole. But there is no question that it has slowed down our penetration of the Chinese market. As you would imagine, there was also a lot of negative press.
CHARLIE ROSE: Yeah. And how did that go in terms of — it made people not necessarily want to use Google search?
ERIC SCHMIDT: I am sure it was not good for Google’s brand in China.
CHARLIE ROSE: Yeah. What do you have — what percentage of the market?
ERIC SCHMIDT: We already had a majority share. And so, and Baidu is probably the significant victory here. But in any case …
CHARLIE ROSE: Because it wouldn’t go down.
ERIC SCHMIDT: We are — our objective is to remain in China under the rules that we can abide by.
CHARLIE ROSE: Which as long as you are not allowing them to hack into people who use your search.
ERIC SCHMIDT: That’s correct.
CHARLIE ROSE: That’s the — that’s the principle you are adhering. And nothing has changed about that.
ERIC SCHMIDT: That’s correct. And I think …
CHARLIE ROSE: Or is likely to change about that.
ERIC SCHMIDT: I think the situation is stable. I want to make it clear, however, that the Chinese government can arbitrarily change this outcome at any time. So if they wish to make our lives much more difficult in mainland China, they are — it is relatively easy for them to do so technologically.
CHARLIE ROSE: So, a businessperson comes to you and says tell me about — what are the lessons from your Chinese experience, what do you say?
ERIC SCHMIDT: The fundamental lesson is that Google is a company run under a different set of principles than a lot of other businesses and we’re happy with that decision.
CHARLIE ROSE: Privacy today …
ERIC SCHMIDT: Right.
CHARLIE ROSE: … the other big issue for you to think about. Where are we?
ERIC SCHMIDT: Privacy turns out to be very, very important. And people care an awful lot about privacy. And yet there is an enormous amount of information that’s personal that either they are putting on, which they will probably come to their regret later in their lives, or stuff about them that they can’t seem to control. So the Google position has been that we want to give you as much control over your privacy as we can. We have, for example, with after a certain number of months — in
this case, 18 — the logs of your searches are anonymized. They are literally deleted in such a way that they can’t be tracked back to you. That is an important privacy step. We are working on additional privacy tools that would allow you, for example, to control what people can see about what you are doing and literally a privacy monitor and a privacy page and so forth. So that you can decide.
Ultimately the solution to privacy will be to let people make their own decisions. There are trade-offs in privacy and they are subtle. So it is important that we let people make those trade-offs.
I should also say that there is a lot of disagreement among governments about privacy. And governments have all sorts of different rules. I mean, a typical example would be in London, if you are walking down the street, you are undoubtedly on a camera.
CHARLIE ROSE: On a camera. Right.
ERIC SCHMIDT: Whereas in the United States that would not be acceptable culturally, and these are two countries that are very similar to one another. So the fact of the matter is that you will see different privacy laws in different countries. And Europeans tend to have the most — the strictest privacy laws, and so I think all of us will probably ultimately come up with strategies that are a derivative of the European ones.