Henry Blodget: Doesn’t Know Crap About The Google China Drama

How can someone who has "ran Merrill's [Merrill Lynch] global Internet research practice and was ranked the No. 1 Internet and eCommerce analyst on Wall Street by Institutional Investor and Greenwich Associates" be so completely ignorant as to be negligent about Google's situation in China yet be so confidently opinionated?

Boy, Did Google Blow It In China*

Henry Blodget | July 9, 2010, 11:10 AM

This morning came news that China has renewed Google's license to operate in the country.

That seemed like good news--Google wins the China standoff!--until it was revealed that Google's China search engine will now effectively be censoring ALL web pages, instead of just the ones that the Chinese government found objectionable.

My initial reaction was something more along the lines of this, a simmering disbelieving outrage. Fortunately, being interrupted by a friend to discuss an upcoming bachelor party in Vegas has taken the edge off so now I'm just indignantly disturbed. How can someone who ostensibly makes their living understanding the tech and internet industry can be so wrong about a major -- and well-covered -- story? First it was MG Siegler of TechCrunch, and now it's Henry Blodget of Silicon Alley Insider.

Right, look, I can forgive the people who simply don't understand how the internet works outright, or the difference between a domain that automatically forwards visitors to another domain and a domain with a single page featuring an image that can be clicked to visit another domain. These people may know other things I don't, like how to tune a carburetor or do stoichiometry. But there's little to no excuse for these people to not know exactly what's going on with the Google China drama. There just isn't. No. None.

So now that we've covered why being wrong would be embarrassing for someone like Mr. Blodget, let's review how Mr. Blodget is embarrassingly wrong¹:

Google's China search engine will now effectively be censoring ALL web pages, instead of just the ones that the Chinese government found objectionable.

Huh? Google China doesn't have an internet search engine. It hasn't had one since Google dismantled it at the end of March and began redirecting all google.cn visitors to google.com.hk so they could use the internet search engine there. The reason Google did this was because it no longer wanted to self-censor their mainland China search engine index and search results. They also did not want to be kicked out of the mainland China market so instead of simply uncensoring their mainland China search engine and continue offering it to mainland Chinese internet users in violation of mainland China laws, they just shut it down.

The clever thing was the redirect. By using an automatic redirect, internet users who typed in google.cn still reached a Google search engine they could use. From a user's perspective, very little changed especially when Google dressed up google.com.hk to resemble the old google.cn. For the most part, nothing changed on the front-end except for the URL automatically changing from google.cn to google.com.hk.

Google.com.hk redesigned to look like the old google.cn.

The real change was behind the scenes and it was mostly for Google's benefit. Users were no longer using the self-censored Google China search engine but were now using the uncensored Google Hong Kong search engine. Both were still functional search engines. The difference for users were that searches for sensitive keywords would now result in a Great Firewall interruption to their internet connection to google.com.hk whereas previously, they would get search results but they would lack all the results the Chinese government deems objectionable. Either way, for them, they had no greater access to internet content the Chinese government doesn't want them to see. The more important difference was for Google because it was no longer legally obligated to censor the results it offered to mainland Chinese users. Their immediate objective in all of this was not to increase mainland Chinese netizens' access to censored internet material but to stop being arguably complicit in the very act of censoring the internet search results they returned to anyone who made a query on google.cn.

Google knows that the redirect didn't really increase the amount of internet content accessible to mainland Chinese internet users, but they were fine with letting many in the media mistakenly and stupidly celebrating that as the major coup of Google's end-of-March redirect. What was important was for Google to stop feeling guilty about complying with Chinese government mandated censorship. They didn't want to be part of it and now they weren't. No one could blame Google for participating in censorship anymore. The fact that certain internet material was still censored for mainland netizens was the Great Firewall's fault, not Google's. After all, google.com.hk does offer uncensored results but if the Great Firewall that monitors all internet data transmission going into mainland China sees something the government has blacklisted and steps in to cut the connection between the mainland China internet user and google.com.hk, hey, its not Google's fault.

Wow, I've just re-explained what I and many others have already analyzed and shared 3-4 months ago.

The above is important to understand because only when you understand it will you know how incomprehensibly wrong Mr. Blodget is by remotely suggesting that Google is now "censoring ALL web pages". Google is not doing anything of the sort. Yes, Google was censoring some search results (not web pages) when it was still operating the Google China search engine that used to be accessible at google.cn. It is no longer because there is no longer a Google China internet search engine. No greater or less censorship was involved at all with yesterday's news that the Chinese government renewed Google's ICP license.

Now we need to backtrack a bit to Mr. Blodget's opening comments:

This morning came news that China has renewed Google's license to operate in the country.

That seemed like good news--Google wins the China standoff!

No, the ICP license renewal issue was not about whether Google could or could not "operate" in China, it is mostly about whether or not Google can keep and use the google.cn domain name.

The "China standoff" was not about whether Google could operate in China or not. Google was always welcome to operate in China provided it followed China's laws. The "China standoff" was really only about the internet search engine portion of Google's business in China. The "standoff" was when Google threatened to stop self-censoring its Google China search engine in violation of China's censorship laws. The "standoff" was whether or not Google would really do so and challenge the Chinese government to kick it out of China for the violation. The "standoff" was whether or not the Chinese government would buckle to Google's challenge and international pressure and allow the Google China search engine to operate uncensored in contravention of its own censorship policies.

Well, we know what happened. The Chinese government stood its ground, refusing to budge from its position on censorship and acquiesce to Google and anyone advocating less internet censorship. Google, on the other hand, had painted itself into a corner. It wanted to stay in the mainland Chinese market somehow but it couldn't just continue censoring the Google China search engine. It had already said it would no longer do so. Going back would be mighty embarrassing. So Google, clever guys that they are, found something of an exit from that corner through the redirect to Google Hong Kong, as we reviewed above. Google was outside of China's laws now but google.cn was still a mainland China-accessible search engine serving mainland Chinese users. Again, the difference was that the GFW had to do all the censoring and Google itself was off the hook.

Both sides kinda sorta "won" here. Google got what it wanted: to no longer be directly involved in censoring its search results. China didn't have to compromise on its censorship policies: Google may have openly complained about China's censorship policies but it didn't try openly violating them and force the Chinese government to kick it out. Google could still offer a search engine to mainland Chinese internet users. China could still use the Great Firewall to censor anything it doesn't like coming out of google.com.hk. Both just largely went their separate ways after a three month "standoff".

The "good news" about Google getting its ICP license renewed is that it gets to keep the google.cn domain name up and running as a point of access for mainland Chinese internet users who aren't typing in "google.com" or "google.com.hk'.

Let's move on:

Specifically, Google's search engine in China will now consist only of product and music searches (and maybe maps, although, according to China expert Bill Bishop, that involves a different license that has yet to be renewed).  The landing page will also include a link to Google's Hong Kong site, which includes web pages and which, for now at least, China's government is allowing Chinese citizens to access.

I'm sorry that Mr. Blodget learned something spot on about the Google Maps situation in China from Bill Bishop but utterly failed to learn the actual Google China situation as I'm confident Bill Bishop knows. As such, I'm voluntarily embarrassed that Bill Bishop's name is even invoked here².

Anyway...

No, Google's search engine in China does not now "consist only of product and music searches." Mr. Blodget clearly does not understand Google's service offerings in China and much less how they are made available through the google.cn domain name. The ICP license may be tied with the google.cn domain name but the google.cn domain name is not necessarily tied to any "search engine". Yes, Google once hosted the Google China search engine at google.cn just like Google hosts its Google Hong Kong search engine at google.com.hk. But that was merely a service provided on that domain name. Google also previously provided music search, product search, and a translation tool on google.cn and -- more importantly -- continues to do so.

Yesterday's ICP renewal news did not involve any censorship of any search engine Google offers on google.cn. Remember, there isn't a Google China search engine anymore and there hasn't been one since the end of March. From March until yesterday and, the search engine provided to visitors of google.cn was actually the search engine at google.com.hk. Users reached the google.com.hk search engine through google.cn. Yesterday's ICP renewal hasn't changed that and the search engine accessible at google.cn now is still the uncensored by Great Firewall filtered search engine at google.com.hk.

Mr. Blodget clearly knows how to the use the internet and read those who know their stuff better than him. So how can he have followed this entire Google China drama from last December until now without understanding the very basics of the story?

The big takeaway from the ICP renewal news is the fact that the Chinese government has apparently accepted a big clickable image link that looks just like Google's normal search bar and takes the visitor to google.com.hk as a replacement for the previous automatic domain redirect to google.com.hk that they told Google was not acceptable.

Okay, so instead of an automatic redirect, users just need to click once to get to the same google.com.hk search engine? Not much of a difference and the Chinese government can't be stupid enough to not realize that³. The big news is how this little change has allowed Google to continue providing a mainland-accessible search engine service to mainland internet users without having to comply with mainland China self-censorship requirements.

Why? Because everyone thought that Google would no longer be able to offer internet search services to mainland Chinese internet users if it doesn't self-censor like Bing or Baidu or other mainland Chinese search engines. Google is finding a way to do so and though its market share has deteriorated, it hasn't deteriorated as fast as would happen if Google were unable to offer any kind of search engine service to mainland Chinese netizens. Google is simultaneously staying in the mainland China internet search market and not engaging in any censorship it doesn't like by offering the google.com.hk search engine through the google.cn domain name.

Imagine Baidu setting up a baidu.us company and domain name outside of mainland China that offers an uncensored version of Baidu's search engine and then redirecting everyone who visits baidu.com to baidu.us. Anyone think the Chinese government would let Baidu get away with that?

Guess what? That's what the Chinese government is letting Google get away with right now.

Moving on...

As long as China users don't mind clicking the Hong Kong link, and as long as the Chinese government allows mainland Chinese to access the HK site, Google will have achieved a balance that doesn't render it entirely irrelevant in China.  Based on the government's prior behavior, however, if the HK site gets major traffic from mainland China, we would not be surprised if the government eliminated Google's ability to link to it from its China site.

Yes.

Bottom line, we think Google has come out on the losing end of this negotiation.

What? No!

How?! How has it come out on the losing end? Of what negotiation?

The negotiation over what changes they'd have to make to google.cn to get their ICP license renewed? They won that one, much to the astonishment of just about everyone who knows a big clickable image link is not much difference from an automatic redirect.

The negotiation over search engines operating in mainland China being required to self-censor in compliance with mainland China laws? They lost that one because the Chinese government wouldn't budge on that or allow them to be an exception but it was Google who initiated that negotiation knowing full-well how unlikely that policy was going to change. They gambled and lost. They cut their losses by shutting down the Google China search engine and redirecting google.cn to google.com.hk. That the Chinese government didn't immediately and still hasn't blocked google.com.hk outright is a huge freaking win for Google. See the previous two bolded sentences.

So why does Mr. Blodget (or whoever "we" refers to, all of Silicon Alley Insider?) think Google has come out on the losing side of the negotiation?

Google's initial stance toward China--do business in the country despite the country's infantile censorship demands--was a tough decision, but in our opinion it was the right one.  Google's refusing to do business in the world's largest and fastest growing Internet market might have made some free speech advocates happy, but it would not have helped anyone in China.  And it certainly wouldn't have helped Google's shareholders.

Okay...go on...

Google's more recent decision, meanwhile--to make a huge show of refusing to censor its search results--may go down as one of the worst in the company's history.

Uh huh...

Importantly, it wasn't Google's decision to stop censoring that was a bad one. It was the way in which Google handled the decision.  By making a big announcement and and redirecting its search engine to Hong Kong, Google left the Chinese government no way to compromise without losing face.  A few months later, Google has had to cave further, providing China with a crippled search engine that effectively censors not just objectionable web pages but just about everything.

Wait...what? Yes, Google tried to use international and public attention to shame the Chinese government on its censorship policies. That was a ballsy move but it failed. The redirection to Hong Kong, however, did not coincide with the "big announcement" (of refusing to censor any longer). Google didn't do these things together. The redirection came after Google failed to negotiate for itself any acceptable exemptions⁴ from the Chinese government. In fact, it can be argued that this redirection was something of a face-saving move for Google because it allowed them to claim they were still offering a search engine but without having to self-censor.

The Chinese government, on the other hand, had many options to save face. Right, it was already in a spotlight it didn't want to be when Google publicly expressed it was no longer willing to self-censor and would risk being kicked out of China. Right, the Chinese government lost some face there but only because they were being harassed about an issue they're always getting criticized over. At that point, they could either give into Google and lose face for not standing by its own policies and laws or it could ignore Google and keep suffering the same criticisms it already expects. No brainer, they stood by their laws. Google then spent 3 months taking their sweet time before actually stopping any of their self-censorship. They had called the Chinese government out and were now trying to avoid an actual showdown by trying to negotiate something, anything. They failed.

At that point, Google had to decide if it wanted to remain in the mainland China internet search market or not. They chose to remain. However, they also couldn't or wouldn't continue self-censoring. So what did they do? They cleverly shut the Google China search engine down and redirect to Hong Kong. Again, I'm repeating myself, but it is important to know and be very clear on how all of this unfolded and why...so you don't echo or nod your had stupidly at the main things Mr. Blodget is saying.

A smarter move would have been for Google to QUIETLY stop censoring results...and be sluggish about correcting the problem when it was brought to their attention. This would have satisfied the company's moral qualms while forcing the Chinese government to actually threaten to kick the company out of the country.  Google then could have caved modestly, censoring results here and there, just enough to keep the censors from following through on their threat. This would have provided a much better search engine in China, thus helping Chinese citizens way more than Google is now.  It would also have helped Google's shareholders, by allowing the company to continue to operating in the biggest future market on the planet.

What the fuck? Okay, sure, that's a game Google could have played if we believe its "moral qualms" aren't stronger than its desire to stay in the "biggest future market on the planet." But we don't know that. More relevantly, how long could Google play that game before the Chinese government either wises up to it or gets tired of a chronic repeat violator of its laws?

Google shutting down its Google China specific search engine may have made the Chinese government upset that it was no longer agreeing to do what it had years before agreed to, but it was a clear and open change of heart and mind. There was an open disagreement. Sure, the Chinese government may have preferred Google expressing their disagreement in private to minimize the unwanted attention to its censorship policies in the public sphere, but I imagine they'd prefer open disagreement to openly dicking the Chinese government's censorship policies by suddenly and secretly violating them.

It's one thing to disagree with your spouse on giving your kid the birds and the bees talk, and another to be secretly showing your kid pornos while your partner isn't looking, only ceasing your corruption just enough to not get kicked out of the house when you get caught. How many times do you have to get caught before your spouse has had enough? Sure, you're offering a better sex-ed experience to your kid while you can, but are you fucking serious?

Like Mr. Blodget, I want Google to stay in "the biggest future market on the planet" and I do think Google having a self-censored China-specific search engine would help Chinese netizens more in many -- not all -- ways than what Google is doing now (redirecting to Google Hong Kong through the Great Firewall). However, I also know Mr. Blodget, like Barron's,  doesn't actually have much of a clue of what Google is doing now. More importantly, while its situation is still precarious, Google seems to be happier with what it is doing now, finding ever more clever ways to stay within technical compliance of mainland China laws and regulations, than with operating a dedicated Google China search engine that it has to self-censor.

Sucks for the shareholders though.

As it is, Google will likely quickly become irrelevant in China. Its principled stand, meanwhile, has already been forgotten, and it has gotten next to no support from any other foreign companies.  Baidu's share of the China market is surging, and it will likely continue to do so.  And Google's stock price has dropped sharply.

No. Why would Google likely quickly become irrelevant in China as a result of yesterday's news any more than after its shuttering of the Google China search engine at the end of March? If anything, yesterday's news, when actually understood, has given Google's endeavor to continue offering an uncensored search engine to mainland China another lease on life. The Chinese government could have refused to renew the license and shut down the google.cn domain name entirely, citing the image link as not significantly different from an automatic redirect, thereby removing another known and previously well-marketed point of access to Google's services for the mainland Chinese internet users. It didn't. This allows Google to still fight for relevance in the China market.

As for the forgetting of Google's "principled" stand, was anyone surprised?

Now, you might remember the star next to Mr. Blodget's blog post title. This is what it leads to:

*UPDATE: Google provided the following in response to the original version of this post:

"As we said in our June blog, we asked the government to renew our license on the basis that we would make some products--which don’t require any filtering by Google--available locally on Google.cn. We will continue to offer our uncensored web search and other services through .com.hk--so it’s entirely consistent with the position we set out earlier this year."

A person familiar with Google's position on this matter argues that, under this new solution, the company is not censoring anything and has not had to "cave" in the least.

We disagree with that view, as we feel the company's China search engine has gone from censoring a handful of sites to censoring the entire Internet. We also note that Google has been forced to stop automatically redirecting .cn users to the HK site and instead merely provide a link to the HK site (which, as we understand it, China users were already able to access). That said, we can see how the solution does address Google's moral qualms, as the company is no longer being forced to block some sites and not others.

"We disagree with that view"? I can't believe Google themselves sent a message trying to clear things up for Mr. Blodget and he's still misunderstanding and confidently misrepresenting the entire Google China drama as well as the ramification and implications of yesterday's ICP renewal news. Seriously, what the hell is going on here?

Mr. Blodget, listen again to that person familiar with Google's position on this matter. Now, I disagree with that person that Google hasn't had to "cave" insofar as they had to "cave" a little by stopping the automatic redirection of the google.cn domain name and making a dummy image link instead. But that's just clever of Google. I'm pretty sure the people are Google weren't even sure if that little change would work and they were laughing their asses off when it did. It is absolutely incredible that the Chinese government is playing along with this, but hey, not that anyone who wants Google to remain accessible in China is complaining, right?

But look, the entire last paragraph is just another frightening example of how completely but arrogantly ignorant Mr. Blodget is on this matter. Now, I'm sure Mr. Blodget is an intelligent person with many other competencies, but they clearly were not brought to bear here.

Had to be said.