This morning I did a spot about Google’s China censorship on the BBC’s 5 Live radio, ”Wake Up to Money”. The show can be heard via this link , with my part being about half way through the Friday broadcast).
The topic came up due to a proposition put to Google’s AGM by a shareholder (the Office of the Comptroller of New York City) that the company should ensure free speech and protect users in places where “political speech can be treated as a crime”. The proposal was, unsurprisingly, voted down (and Google’s 2-tier shareholding structure is not very democratic).
Here are key points I made on the show, with some additional notes:
• Companies have to abide by local laws in the countries where they operate. It is not for foreign companies to make policy or to lecture their hosts. It is better to engage positively and to share best practices.
• Foreign companies, if they are going to make a decision to be in China, have to adapt to local conditions. Different laws mean different operations in China compared to the US. Google is not alone in this – Yahoo! and Microsoft have also been criticized at home (as have Chinese providers such as Sina).
• Censorship is a difficult issue in China, which clearly has political sensitivities. But China is not alone, as recent events show – including the fallout from Dutch cartoons that were insulting to Muslims, and YouTube videos in Thailand that were disrespectful to the King. The US media is also not averse to a bit of self-censorship (as when the Dixie Chicks spoke out against Bush and the war in Iraq, and promptly found themselves subject to a virtual boycott). There is also an ongoing international debate about censorship of blogs and online forums.
• Google’s decision to censor in China was a compromise solution for them – and an obviously uncomfortable one. It balances their desire to serve as many people as possible with their desire to supply as much information as possible. As Google have made clear in the past, their censored China site is provided in addition to the global site (which provides patchy service due to actions from China’s “net nannies”).
• Foreign companies in China cannot rely on the strength of their brands, or their historical competitive advantages, at home. They need to compete with strong domestic players (in Google’s case this means playing catch-up with Baidu) and increasingly nationalistic consumer sentiment. To do this they need a strong local management team, a localized offering, and long-term commitment.
• Companies have to be aware that what they do in China (or elsewhere) may have an impact in other markets. Google’s move on censorship created a backlash in the US, while brands such as KFC, Pizza Hut, McDonalds and Apple have recently been hurt internationally by accusations (some unwarranted) of unethical treatment (pay and conditions) of workers in China.
Whether online or in the real world, the actions that global companies, such as Google, take are seen in a global context. Reputational damage from going into a market, or potential losses from saying out, can generate different responsese from different stakeholders – and have an impact on share prices. Analysis of risk should therefore go hand in hand with analysis of opportunity when making commercial decisions – but political posturing should be reserved for the politicians.