At the outset, let me make clear that I am not a proponent of barriers to trade. Neither am I supportive of muzzling free speech. With that said, I would like to dwell today on how China’s government has been successful in giving its home-grown internet giants a stranglehold on the domestic market by using censorship as a trade barrier.
Last week, Google CEO Sundar Pichai told the Wired 25 conference that his company had been testing a version of its search engine named “Project Dragonfly" that would pass muster with China’s censors. Pichai said he was excited about the result of the tests; he reported that the censored version would still serve over 99% of queries. Pichai made quite clear that the internet giant intended to go after the Chinese market.
Earlier statements from Google executives, in response to leaks to the press, were that the work on Project Dragonfly had been “exploratory", “in early stages" and that Google was “not close to launching a search product in China". Pichai’s presentation last week confirmed otherwise.
The leaks had led to protests, even within Google. Fourteen hundred Google employees signed a petition demanding more transparency about the project and employee input into the decision. Human rights groups including Amnesty International sent an open letter to Google’s management seeking clarification.
In early October, US vice-president Mike Pence warned that Project Dragonfly, if released, would both strengthen censorship in China as well as compromise the privacy of Chinese customers. Pence should probably also have dwelled on the privacy of customers from the US, but that’s a discussion for a different day.
On a side note, during the second quarter of this year, Google’s famed motto “don’t be evil" was removed from the preface of its code of conduct and relegated to the last line.
During his presentation, Pichai made it clear that Google could not afford to ignore China, which has over 20% of the world’s population. I wonder where that 20% figured in Google’s calculations eight years ago. On January 2010, Google announced that in response to a hacking attack from China, it was no longer willing to censor searches in China and would pull out of the country completely if necessary—which is essentially what happened.
This would seem fair enough. Internet firms walk a tight rope when it comes to balancing local laws on hate speech and free speech, and routinely need to adjust what their users see in various countries around the world. In Thailand, for instance, there are strict laws about lèse-majesté (or talking ill about the King), and in Germany, distributing Nazi era propaganda is illegal. As a result, companies such as Google and Facebook publish a detailed annual transparency report. These reports show the number and type of content takedown or user-information requests received, and the number complied with from each country. Sometimes, the decision to quit a country is made for them.
Meanwhile, in the eight years since Google quit, the Chinese market has exploded, growing to over 800 million users, most of them on mobile—paradoxically via Google’s Android—from just over 300 million in early 2010. If Google were to re-enter China, it would run up against Baidu, which has the lion’s share of the market, as well as other home-grown search engines.
Pichai hopes Google will win Chinese users by providing more reliable information. Search engines are sticky, however, and it is difficult for upstarts to upend dominant players. The Chinese firms have also had enough time to create a network effect with other services such as WeChat, a messaging service and with other services such as home-grown e-commerce sites, online banking, and taxi booking apps.
Speaking of taxi booking, remember that Uber also recently quit China. I wonder if it would bump into the internet wall of China if it sought to return.
Siddharth Pai is founder of Siana Capital, a venture fund management company focused on deep science and tech in India.