Google and China: A Social Take

Google is led by three individuals: Sergey Brin, Larry Page, and Eric Schmidt. They set up a stock structure which allows them to maintain real power over the company. The reason they installed such caution is for situations like what recently occurred with China.

China, as a communist country, maintains tight control over the flow of information inside their borders. Information is power, so these type of decisions aren’t to preserve the innocence of children. Google for about three and half years (2006 ’til early 2010) operated in China under the authority of the state. This manifested itself as censored results on searches. In January of 2010 it was reported that Chinese operatives hacked Google’s servers and specifically went after human rights activists. One method for the intrusion was to replace computer source code with compromised source code, which has back doors coded in. This subverts the usual way intrusions are detected with IP addresses. Google, Sergey Brin specifically, said they had enough and basically pulled out of China.

From a business stand point this is a shocker. China has well over a billion people and many of those people are recent members of the middle class. The advertising revenue potential of China is immense to Google and any other company.

This is why it’s important for Brin to have huge numbers of voting shares, because just about any other shareholder group wouldn’t let this happen. But the move has many positives for Google.

For starters, Google’s algorithm and feedback loop can’t have biased noise coming back in. It pollutes the relevancy part of their model. If searches are constrained to only certain sites or types of data it begins to undermine what is really being looked for and what isn’t. The integrity of the search is eventually out the window.

Secondarily, and possibly more important, it’s generalized that generation Y is socially prioritized. They ask about topics like green energy, pollution, and human rights. They don’t want to work for companies that are seen as evil and Google preaches “Don’t be evil.”

Just earlier this year 60 Minutes ran a story about a company producing something called the Bloom Box. The story is about an invention that produces energy more efficiently and with less transmission loss than local power stations. It isn’t cost competitive yet, but the angle the early adopters are taking is that this type of investment allows them to tell talented 20 somethings that they are socially responsible. This person can work for Union Carbide or Google. Google wants to recruit them and losing a few dollars on energy production is a cost worth absorbing.

The question is: Is 36 year old Sergey Brin, as a leader of Google, really foregoing the potential profits of China or is he protecting the image and brand of Google within the US? Is this about the prospective labor pool needed to sustain Google as an innovative company in an industry where 5 years is a long time.


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