Wednesday, June 20, 2012

Why Google blew it for Facebook in China - Shaun Rein

When Google decided to withdraw its search engine from China, it was not just a corporate decision, but had large repercussions inside the country's government too, explains business analyst Shaun Rein in the Pandodaily.

The Pandodaily:
“I don’t see how Facebook could succeed in a meaningful way in China,” [Shaun Rein] says. One of the major reasons is that China’s more reform-minded government officials felt like they got their legs cut off at the knees by Google. Rein is angry at Google because of that. 
“When Google came into the country, they made a deal with the government, saying ‘We’ll follow your rules, and you’ll allow us to operate,’” Rein says. “And I think there was a lot of push-back within the government, saying ‘We don’t trust Google.’ But a lot of the fore-minded officials said, ‘We vouch for them, we’ll do it.’” 
When in 2010 Google very publicly pulled its search operations out of China in response to “sophisticated cyber attacks,” including the infiltration of Gmail accounts of China-connected human rights activists, those officials who greenlighted Google got in trouble. In China’s government, discipline is taken very seriously, and in Chinese society, loss of “face” – which can be roughly understood as a blow to one’s reputation – is just as damaging. The consequences of the Google drama are thus hurting Facebook today. 
“Nobody in the Internet field is willing to stick [out] their head and go to bat for an American Internet player again,” says Rein. “Because it’s not worth it for them. They don’t want to see their career stunted, like those guys who approved Google originally.”... 
Ultimately, Internet media companies such as Facebook, Google, and Yahoo were always going to have a tough time in China anyway, because of the nature of their businesses. 
“A lot of people have been saying that China’s government is becoming more protectionist,” says Rein. “That’s not true. China has always been protectionist. There’s always certain sectors, as long as I’ve been here since the mid-90s, that foreign firms cannot operate in easily. And one of them would be, say, media. Another would be electricity, finance, and the Internet. The Internet is actually the worst, because it’s a mix of media, it’s a mix of entertainment, it’s a mix of culture and everything.”
More in the Pandodaily.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Shaun Rein is the author of the recently published book "The End of Cheap China: Economic and Cultural Trends that Will Disrupt the World". More about Shaun and his book in Storify.


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