google in china: an ethical debate -...

Google in China: An Ethical Debate 1

Spring 2012

CST 373 – Cahill

Ethics in Information Technology

Google in China: An Ethical Debate

Brian Bump Chad Bradford

Giovanni DoCanto Brian Duckart

Leslie Kavasch Jeffrey Lewis

Jordan Rodriguez Nathan Schuette

Cenovio Zamora-Duarte


Table of Contents

Problem Definition…………………………………………………………………….3

Historical/Legal Context……………………………………………………………..4

Stakeholders…………………………………………………………………………..8

Competitive Analysis…………………………………………………………….....12

Economic Factors……………………………………………………………………12

Technological Factors………………………………………………………………14

Recommendations…………………………………………………………………...15

Advantages……………………………………………………………………………17

Disadvantages………………………………………………………………………..18

References…………………………………………………………………………….19


The Problem Definition

Google, a U.S. based company, should not play by the United Statesʼ

standards of conduct when doing business in China, specifically relating to

privacy and individual rights, and should bend to the policies of the Chinese

government. We will present our argument to, you, the Google Board of

Directors, so that you can see the overall advantages of continuing to do

business with the Chinese government. We will discuss the historical context of

the past issue and the benefits of the future for our company. We will consider

everyone involved in this issue and what Googleʼs competitors are doing. As

necessary, we recommend Google do what it takes to gain back the trust of the

Chinese government. This proposal will go in depth into the financial but also

ethical benefits of going back into China. So far it has been proven that even if

Google takes a stand against the issue of censoring content, other companies

will step in to do what Google will not. Finally, we will discuss the disadvantages

of doing business with China, but also how we can prevent those disadvantages

from getting in the way of our overall mission.


Historical/Legal Context

Laws Regarding Internet Content in China

The basic rules of the Chinese government regarding Internet content, as

established in 1997 1:

o No unit or individual may use the Internet to create, replicate,

retrieve, or transmit the following kinds of information:

o Inciting to resist or breaking the Constitution or laws or the

implementation of administrative regulations;

o Inciting to overthrow the government or the socialist system;

o Inciting division of the country, harming national unification;

o Inciting hatred or discrimination among nationalities or harming the

unity of the nationalities;

o Making falsehoods or distorting the truth, spreading rumors,

destroying the order of society;

o Promoting feudal superstitions, sexually suggestive material,

gambling, violence, murder;

o Terrorism or inciting others to criminal activity; openly insulting

other people or distorting the truth to slander people;

o Injuring the reputation of state organizations;


o Other activities against the Constitution, laws or administrative

regulations

When examining why Google backed out of China in the first place, we

must recognize the issue of what happened and how we can prevent it from

happening again before we discuss reinstating a business partnership. In

December 2010, Google reported to the public that its private databases had

been hacked by a sophisticated cyber attack that had originated in China. A virus

entitled Trojan.Hydraq caused the attack, which, according to McAfee security

systems, was transmitted when Google employees were redirected, or forced

into visiting a malicious website. The hackers were able to embezzle intellectual

property. The most threatening discovery about the attack was that the hackers

attempted to access the email accounts of several human rights activists. For

industries such as Google, the cyber attack was highly coordinated and

sophisticated. The attackers utilized over a dozen pieces of malware and multiple

levels of encryption to access information. Google removed itself as a presence

in China because of the safety threat to important information.2 Executives stated

that not only was this a security issue, it was an issue of freedom of speech and

that Google could not continue its partnership with the Chinese government.

Google admitted to knowing that its actions would have consequences, but also

admitted to not telling Google.cn employees that they were not going to continue

working there.3 This shows that in their decision, Google did not completely think


about every consequence their actions would have, including people losing their

jobs without knowing about it first. We could easily make the argument that this is

going against Googleʼs motto.

Historically, Google has established a precedent of complying with the

laws and social institutions within the countries where it does business. In India,

the company has censored search results deemed anti-religious or anti-social by

a government lawsuit.4 Also, according to Googleʼs transparency policy, Google

currently complies with regular requests from many nations, including China, to

censor content.5 So despite moving their search engine to Hong Kong, they still

comply with the Chinese governmentʼs censorship requests. Google also still

operates in the country selling ads to Chinese companies that target international

markets.6 The only thing Google isnʼt doing in China is capitalizing on the market

opportunities.

China has a long history of censorship of its entire media with a large

focus on the Internet. The governmentʼs main motives are to protect state secrets

as well as maintain order of the worldʼs largest population. The government has

motives beyond state security. Financial insurance is also important for this ever-

growing nation. Specifically, the Chinese government looks for any and all forms

of disloyalty to the nation, criminal activity including terrorism, and spreading of

non-truths. One could argue that it is necessary for these searches to be blocked

in order to ensure safety. The government has also banned YouTube and other

Google products that are deemed unfit for residents.7


As for Googleʼs history, the website became official in 1997; by 1998 the

company had its first big investor for $100,000 and set up shop in a garage in the

now famous Silicon Valley. In May of 2000, Google offered versions of their site

in 10 different Western languages. Later that year, Google created Chinese and

other Eastern language versions of their site.8 In 2002, Google became

inaccessible in China due to unconfirmed reasons, but heavily suspected of the

site being blocked from within the country. Google worked with Kai-Fu Lee, an

ex-Microsoft employee, to create Google China in 2005, which was designed to

adhere to Chinaʼs strict censorship laws. Microsoft ended up suing both Google

and Mr. Lee for potentially stealing secrets for a rival company. This was a direct

violation of contractual agreement between Mr. Lee and Microsoft.9

In other countries, Google has run into some complications with

governments in which they conform to. In February of 2010, three Google

executives were handed six-month suspended sentences for breach of the Italian

Personal Data Protection Code. Other examples include when the Czech

Republic banned Google from collecting street view photos, while leaving already

acquired photos to remain accessible.10 Google was also required to hand over

collected information to governments in Spain, France, and Germany.11 Very

similarly, in Portland, Oregon, courts ruled that data collected in street views

must be handed over.12

While Google and other like companies such as Yahoo and Microsoft have

been receiving heavy criticism for following Chineseʼ unethical control over


residents, “80% of Chinese think the Internet should be managed or controlled,

and 85% think the government should be responsible for doing it.”13 Hong Kong

also has noticeably more freedom when it comes to censorship laws. In 2010,

Google decided to back out of China, leaving searches to redirect to a China

based site in Hong Kong, which is not censored. In doing this, Google avoids

legal conflict. By pulling out from China, Google stands to loose out on a

potentially massive market that is reportedly growing at 40% a year according to

the BBC.14 Since 2010, Google has started a new strategy for China. By backing

away from main Google services, it is going to focus its efforts more on their

advertising. They have been starting from the bottom trying to work their way up

on this massive, fast-growing market. With export advertising as its main focus,

Google with be there to help with the rapidly expanding export market. Google is

also looking toward Chinaʼs mobile market.15 City dwelling smartphone users use

their phones majority of the day, ranking third in world usage, according to

Google.6

Stake Holders

When dealing with Google and a new business client, especially if it is a

country as large as China, many are affected in the process. This section will

thoroughly examine the main people involved with the process as well as the

ones affected by it, this way the reader will understand the stakes, costs and


results in order to better understand that China is a necessary expansion for their

empire.

One of the first things to examine is the Board of Directors, which includes

Google founders, Larry Page and Sergey Brin. The rest of the board is well

educated and worldly, from Paul Otellini, who worked as Chief Operating

manager at Intel, which has shown growth around the world, to K. Ram Shiriam,

whom served as Vice president of Business Development at Amazon.16 From the

mentioned Board members, all seem to have a history and background or

understanding with working overseas, so it is difficult to imagine them making the

decision to conform to a countryʼs rules unless they truly understood what the

possibilities and outcomes were. We might get someone to describe their

practices as going against their core which is “Donʼt Be Evil,” but one can very

easily see that before improvement can be made, one must prove themselves

first. To come into a country and create drastic changes in its Internet

accessibility would not be responsible, and Google recognizes itself “as a

company that acts responsibly.” 17

Stockholders and Googleʼs image go hand in hand. If you have a good

image, you sell well, your stock goes up, your investors are happy. Google

opening its doors in China would mean tapping into a 513 million Internet user

marketplace.18 With the money Google is valued at, there is no way that the

stockholders would want to not do this. Googleʼs image maybe seen as evil at

first by doing this, but with time Google can show who they truly are and re-


bloom. There will definitely be a decrease in value in public image and having to

gain China users, but with over 500 million added Internet users, it will not be

long before Google does bounce back and stock increases exponentially with this

new market.

The Chinese government is directly involved because it would be them

who would tell Google what to censor on the Internet. The Peopleʼs Republic of

China has a strong on fist on top of its people, but this does seem to come with

results. When examining China terrorist acts, only three incidents have occurred

in the past two years, and there were no incidents from 1997-2007.19 Now to

imagine a business, like Google, uprooting how a government works to fit their

agenda. This is more morally wrong than limiting rights for the sake of a countryʼs

safety. The China Internet Network Information Center has shown through

collected statistics that about 65% of all Internet usage in China occurs on cell

phones.20 When examining our countryʼs figures, about 92% of Americans use

Google as their mobile search engine, according to, NetMarket Share.21 Now if

Geng Huichang, Minister of National Security, and Wan Guang, Minister of

Information and Technology, both recognize the need for Google, but decide to

limit its results, is that something to rejoice or be upset about? Well, we say

rejoice because Google would be the first Search Engine that isnʼt completely

controlled by Chinese rule. Yahoo is already available in China, but with talks of

China buying out Yahoo, one can easily assume that Yahoo, will not be a long

running engine for the people.22


The U.S. government would also be directly involved with their decision to

react or let Google do its business. However, with Google estimated earnings

and stock at $37.9 billion dollars in 2011, it is hard to imagine with the tax the US

is receiving that they would not want expansion.23 Although one in government

might try to question the ethics of our business venture, they will be presented

with the facts that the laws Google follow are the ones of the country it operates

in.

When examining this issue, you truly realize that there are many people

being affected. You have the Board of Directors, Google Stockholders, Google

Corpʼs Image, the Chinese Government and even the U.S. Government. Now we

must examine the Chinese people and how this issue will affect them. The

Chinese people already have search engines and Internet tools that have

blocked sites and information, but nothing compares to what Google can offer

them, all for free. To not allow access to Google in China is wrong, and although

Googleʼs privacy policy would be changed there, it still does not make a

difference that its tools and programs would still be extremely helpful for the

people. They would be able to see what true Communism is with Google, free

sharing and programs to help everyone equally. The main thing people need to

realize is that the privacy policies in China, although different, will still be

presented to the people in a “transparent form.”


Competitive Analysis

Googleʼs largest competitors in China are Baidu and Yahoo China. China

has over 513 million users with only 38% penetration of the countryʼs

population.18 These users represent roughly 23% of global Internet users.24 The

growth opportunities in this country far outweigh any other country. Once

established the information business generated from a large Chinese user base

would generate demand from many international businesses presents a strong

argument.

Google can provide a lot of benefit to the China by bringing its unique

values and views. It can usher Chinese Internet users to information in Googleʼs

unique and efficient medium. The Chinese can take advantage of the Google

Lab creations and communicate, express and educate themselves in ways that

would not be available without Googleʼs presence.

Economic Factors

Google has made $640 million in annual revenue in China, which is one-

sixth the size of Facebookʼs global ad revenues last year.25 Overall, Google is

still strong but analysts werenʼt impressed with their revenue for 2011, with only

less than 2% of it coming from China.26 Google is missing out on a very large

market in China. It has managed to dominate the Internet search-engine market


in the rest of the world but it needs to adapt in order to succeed in China. Even

though China has a population of about 1,338,299,500 people27 (according to the

2010 census), Google only makes 2% of their revenue there. We must also

consider that only 25% of this population actively using the Internet.25 If Google

had a stronger market share, they might have a little more power. Googleʼs

investors are unhappy that the company isnʼt making as much money as it could

be right now if it had a strong market share in China. As Google grows, it canʼt

neglect the Chinese market. Android smartphones are heavily dependent on

Googleʼs services. Google cutting their services wouldnʼt just hurt them financially

but also the phone manufacturers such as Motorola, HTC, and Samsung.

Google should be highly concerned with the potential amount of revenue

lost should we not bend our policies to Chinaʼs demands. First, China has the

worldʼs largest population for a market with more than 1 billion citizens. It would

be naïve to think that if we stayed out of China that we would not suffer, and in

fact we could be potentially losing about 2% of our revenue. That amounts to

about $400 million, and although that may not sound like much, it is very

important to note that only about 25% of Chinese citizens are connected to the

Internet. Think about the future growth we could be losing out on, and that

number will only continue to skyrocket as Internet accessibility is expanded in the

country. Thus, 10 years from now we could be missing out on an estimated $1.6

billion.


By ignoring China, our competitors will only get stronger, as evidenced by

the recent partnership of Bing and Baidu. This agreement “will direct English

searches from Baidu to Microsoft's Bing, which will deliver the results back to

Baidu's Web pages”.28 Baidu already has roughly 20% of the market share in

China, and currently takes in roughly $1.2 billion in advertising, alone which

makes their partnership with Microsoft a very real threat to our profits.13

Additionally, many other companies have research and development labs in

China, which would mean we could potentially fall behind on any new

technologies that are developed in the region. This would hurt future growth as

well as give our competitors even more of the global market share. Even though

Google accounts for over 80% of all Internet searches worldwide we need to stay

vigilant to ensure that the number does not decrease and profit growth is

sustained.

Technological Factors

As Android phones become more and more popular around the world, the

demand grows. If Google doesnʼt offer their services in China, it will make their

phones much less useful. Android phones depend on Googleʼs Internet search

engine, Gmail, and Android Marketplace. New Android phones have been late to

come to China after Google threatened to cut off services in there. Not having

access to the latest Android phones in China will limit customersʼ choices among


smartphones. This will ultimately take away the freedom to use an Android phone

to its fullest potential. With Googleʼs absence in China, it allows Chinese

companies, such as Baidu, to dominate the market. Android is open-source,

which means that it can be modified to use other companies services by default.

According to a report from TechWeb, 80% of Android phones sold last year in

China will have Baidu set as their default search engine.13 Not having Google in

China will eliminate some freedom of choice for its people.

Recommendations

Critics of China often point to their restrictions on free speech and

censorship of information to be negative impacts on the quality of life afforded to

its citizens. Thus, it is in Googleʼs best interests to have a presence in the country

to try and assist the citizens with access to information. Though Google may

have to comply with Chinese Laws, having a small presence will only help

Googleʼs worldwide image as a company who wants to make access to

information easier, collaboration more efficient, and as a company who will not let

anything get in the way of helping the fellow human being.

Therefore, we present the following solution to both comply with Chinaʼs

policies as well as comply with Googleʼs company values and image. Although

our media may portray our image as a dog with its tail between its legs, begging


for forgiveness, we can overcome this with sustained cooperation. First, we will

need to try and impress the Chinese government with our commitment to its

citizens. This could mean making several donations, and maybe even supplying

Chromebooks to schools. China is used to media disasters, and it is plausible

that they may even be able to help us as, “no one understands the issue of losing

face better than the Chinese state.”29

After getting the green light from the Chinese government, we then offer

our search engine with the censored results at the request of the Chinese

government. Additionally, we disable our ʻInstasearchʼ feature that predicts a

userʼs search due to the unpredictable results that can occur if the servers are

flooded with bogus searches. In order to increase market share, we should begin

partnerships with several other respected businesses that are based in China to

try and build trust with the citizens of China. Once we establish Google as the

premiere search engine and they begin to rely on our services to a greater

degree, we may then be able to try and negotiate with the Chinese government

to try and implement some of the practices we do here in the U.S. or worldwide.

As for the ethical issue of blocking information, we need to realize that we

as a company cannot start a revolution in a country. If they desire more rights,

Chinese citizens need to band together like in other countries with regimes that

remove rights. As seen in the past, if we do not provide services with blocked

information, other companies will rise to the challenge in order to please the

Chinese government and gain market share. We need to encourage the Chinese


people that we are on their side by at least providing them with some access to

useful, non-institutionally destructive material.

Advantages

There are many positive reasons for Google to continue doing business in

China. First and foremost, with 513 million Internet users at the end of 2011 - with

over half of that logging in since 2008 - China is the worldʼs largest Internet

market and itʼs population of web users accounts for a quarter of the entire

worldʼs population who go online.18 Baidu, a Chinese search engine based in

Beijing, saw profits jump 88% in the third quarter compared to the same time

period the year before and as a result is attracting an increasing number of

advertisers looking to get a piece of the China pie.13 The fact that 10 million

searches are conducted in English on a daily basis is also driving the Chinese

Internet market gold rush. Who is supplying Baidu with its English results? Why,

none other than Bing, Microsoftʼs search engine, which currently holds a stake of

the American search market at around 15 -20%.30 Itʼs a good time to note that the

positive reasons for Google to be in China arenʼt only economically based. By

being in China, Google provides consumers there with a greater choice of

products to choose from thus advancing the fight for a freer Internet within

Chinese borders. Choice translates to freedom.


Disadvantages

Google doing business with China would have a negative affect on public

relations that promote freedom of speech and online human rights. Googleʼs

withdrawal from China on January 12th, 2010 brought social awareness to the

extent of Chinaʼs censorship laws. This ambitious business move set an example

for other American companies interacting with China such as Microsoft, and

Yahoo. For Google to now cooperate with Chinaʼs censorship laws would mean

the company would be regressing from its original stand point as well as their

motto, “Donʼt Do Evil”. In doing business with China, we must consider that we

are condoning these strict censorship laws. Consequently, we are also informing

other foreign countries that Googleʼs work conduct and regulations are malleable.

Google doing business in China increases the potential Cyber threats

within the Chinese sector. In the wake of Google progressing into foreign

domains, the company should be weary of foreign attacks. As Google opens itʼs

doors to different populations, it is also exposing itself and putting itself at greater

risks of being hacked or disrupted within each branch extension.

If Google can increase security on their information and realize that some

Google is better than no Google, we can give access to people everywhere and

act responsibly even while working with those who do not.


References

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26. Krazit, Tom. "What Google Might Leave on the Table in China." Technology News. CNET News, 13 Jan. 2010. Web. 19 Feb. 2012. <http://news.cnet.com/8301-30684_3-10434110-265.html>.

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29. Atkins-Kruger, Andy. "Should Google Escape the Death Spiral in China by 'Losing Face'?" Search Engine Watch. Search Engine Watch, 4 May 2011. Web. 19 Feb. 2012. <http://searchenginewatch.com/article/2069225/Should-Google-Escape-the-Death-Spiral-in-China-by-Losing-Face>.

30. Craver, Thom. "Bing and Baidu Team Up for English Search Results." Search Engine Watch. Search Engine Watch, 5 July 2011. Web. 20 Feb. 2012. <http://searchenginewatch.com/article/2084287/Bing-and-Baidu-Team-Up-for-English-Search-Results>.

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