Smarter Utility

 

TMCNet: Web 2.0 companies likely to face tough battle to expand into China

[March 21, 2010]

Web 2.0 companies likely to face tough battle to expand into China

Mar 21, 2010 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) -- Social networking companies like Facebook and Twitter may be masters of the digital universe, but their future growth is imperiled by increasingly aggressive censorship overseas in authoritarian countries such as China, Iran and Saudi Arabia.


Google's recent clash with the Chinese government, which may lead it to shut down its search engine in that country, is just the latest example of foreign companies meeting strong resistance from officials who oppose the free flow of certain information and are deploying ever more sophisticated technology to filter or block access to Internet sites they view as dangerous. It also signals that Silicon Valley companies that provide news and information are in for tough sledding in China and other countries.

"The control over information is a very high priority for the Communist Party. You combine that with its industrial policy that favors Chinese companies and it's a very difficult challenge," said Susan Shirk, a former deputy assistant secretary of state in the Clinton administration responsible for U.S. relations with China. "I don't know if it's hopeless (for i"these companies). But I think it's becoming increasingly difficult." China and other developing countries represent some of the best prospects for future growth for many valley companies, and losing access to them could have a big impact on their bottom line. China alone, with 384 million Internet users and a growing tech-savvy middle class, is the world's largest Internet market.

The microblogging site Twitter illustrates some of the challenges these companies face as they try to expand into countries like China. Last week, co-founder Jack Dorsey said his company will offer a Chinese version of his social networking service. But the site is blocked by that country's communist regime, sharply limiting its reach, though tech-savvy Chinese can use workarounds to gain access to it.

China also blocks Facebook, the social networking site, and video site YouTube, and it is far from the only country to do so.

"YouTube is one of the most blocked services in the world and it's often because people put videos up there that have political content," said John Palfrey, a law professor at Harvard University who studies limits on Internet expression around the world. "In the United States, we might think of that in terms of the Obama girl, but in Thailand, it's a video that's critical of the king or in Turkey it's a video that's critical of Ataturk," the founder of the modern Turkish state.

Cuba, Myanmar and North Korea are the only countries where almost all connections to the global Web are blocked, while Palfrey said the number of countries doing at least some censorship or blocking has gone from two eight years ago to about three dozen now. Iran, for example, blocked access to Facebook for fear it was being used to help facilitate street protests over the disputed presidential election last year, and the Palo Alto company said it saw its traffic from Iran drop in half.

Beginning with the 2008 Summer Olympics, the Chinese government began applying even more controls to the Internet, said Shirk, author of "Fragile Superpower: How China's Internal Politics Could Derail Its Peaceful Rise." Sometimes the government action -- such as redirecting traffic from Google.cn to local competitor Baidu.com -- serves the dual purpose of assisting Chinese companies.

Following Google's discovery of "a highly sophisticated and targeted" cyberattack from China -- aimed at its intellectual property and the Gmail accounts of human rights advocates -- the company announced Jan. 12 that it would no longer accept government-mandated censorship of its results on Google.cn. The dispute is still unresolved, though it increasingly appears likely the Internet giant will shut down at least some of its services in China.

To be sure, the struggles of valley Internet companies overseas aren't always tied to government controls. Yahoo's ambitious expansion plans in China foundered, and in 2005 it handed over operations of Yahoo China to Alibaba after taking a $1 billion, 40 percent stake in its erstwhile Chinese competitor.

And analysts say Google also failed to understand China's complex market and was outmaneuvered by fast-moving local competitors.

"The Internet is evolving very rapidly in China," said Richard Lim, managing director of GSR Ventures. "By the time you figure it out, you are lost." Local companies are not immune. China's Internet giant Tencent reported last week that the government's crackdown on "harmful content" is hurting its business. The government blocks some content providers from sending text messages through the company's popular QQ service.

"The thing that freaks out the Chinese right now isn't so much access to the Internet but the fact that grieving parents in the Sichuan province were able to organize themselves (online, after a 7.9 magnitude earthquake in 2008) and document the collapse of school buildings because of corrupt officials," said Clay Shirky, an adjunct professor at New York University's Graduate Interactive Telecommunications Program.

Nondemocratic governments have an ambivalent relationship with the Internet, said Colin Maclay, managing director of the Berkman Center for Internet & Society at Harvard University.

"The Chinese government, and other governments around the world, are excited about the Internet and Web 2.0 technology and their ability to allow certain information flows," he said. "They don't want to be offline. They do not want to be North Korea or Cuba and lock everything down. But at the same time, they are afraid of information flowing in different ways." Contact John Boudreau at 408-278-3496.

To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com. Copyright (c) 2010, San Jose Mercury News, Calif.

Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

[ Back To Homepage ]