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September, 2018

In China push, Google may be betting on wrong horse

Original article: Think HK

Rights groups and Google employees are stepping up criticism of the tech giant following news reports in August that it plans to re-enter the China market with a censored search engine. More than 12 human-rights groups have called on Google to not provide a censored search engine for China. In August, more than 1,000 Google employees signed a letter calling for greater transparency and ethics at the firm. 

Analysis:

Perhaps Google has been on top for too long. It hasn't faced intense competition in search or mobile operating systems for more than a decade. It owns search outside of China, while Apple is its only competitor in mobile OS. That may be why it sees opportunity in a market where foreign internet companies have been systematically marginalized for more than a decade. 


Of course, Google executives say that search isn't their primary market in China. In fact, they aim to capture the massive Chinese artificial intelligence market, among other things. 


In an August report, Bloomberg notes that Google has been shut out the world's largest internet market since 2010. The report then goes on to point out that domestic firms dominate that market; Apple and Microsoft are notable exceptions, because China has no alternatives - yet. Otherwise, from search to the sharing economy, from messaging to food delivery, Chinese tech firms control the market. 


Remember when Uber spent billions to compete in China? How did that end up? Airbnb is still in China - for now. Let's see if it ultimately does not sell out to domestic home-sharing giant Meituan. As for Amazon, one of the largest retailers in the world, it has exactly 1% of the China e-commerce market. 


Google is right to be focusing on next-generation technologies like AI, but it's not going to get a share of the China market without handing over something valuable to a Chinese partner, the government or both. And even if there is no formal technology sharing, Google will take a risk basing cutting-edge AI technology in China. 


The company announced in December that it would open an AI lab in Beijing. In a blog post, the AI lab's chief scientist Fei-Fei Li wrote: "I believe AI and its benefits have no borders. Whether a breakthrough occurs in Silicon Valley, Beijing or anywhere else, it has the potential to make everyone’s life better for the entire world."


That may be true, but China's leadership has a plan for unilateral AI dominance. According to a State Council plan published in 2017, "by 2030, China should be the world center of AI technology and the AI economy and the value of the country’s core AI industries should exceed 1 trillion yuan." 


Finally, Google may think the world is flat, but U.S. President Donald Trump doesn't, and neither does Congress. Google should carefully evaluate the political risks of assisting China with controversial industrial policies, especially as the company is already in Republicans' crosshairs for other reasons. 


Last week, President Trump said that Amazon, Facebook and Google represent a very "anti-trust situation." Following the President's statement, Senator Orrin Hatch (R, Utah), wrote to the Federal Trade Commission requesting it examine Google’s “anticompetitive conduct.” Hatch mentioned reports that Google has “decided to remove from its platform legal businesses that the company apparently does not agree with.”

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