It was one of those Internet links that triggers the same morbid instinct that makes motorists slow down to stare at a highway accident scene: "Bullying: disabled boy abused in school." The three-minute clip, which was posted to the Google Video platform in 2006, showed four youths in the Italian city of Torino teasing an autistic classmate and throwing tissues at him. At least 12,000 people clicked on the video before Google took it down following a formal complaint from the Italian Interior Ministry.
On Wednesday, a Milan judge convicted three Google executives of privacy violation for not blocking the video from the site. The officials — senior vice president and top legal officer David Drummond, chief privacy counsel Peter Fleischer and former chief financial officer George Reyes — each received a suspended six-month jail sentence. The ruling, which Google said it would appeal, has sparked a vigorous debate about the free flow of information and the legal responsibility of Web-platform companies to monitor the type of material that is posted to their sites.
In a statement, Google reacted angrily to the verdict, calling it an "astonishing decision ... that attacks the very principles of freedom on which the Internet is built." The California-based search-engine giant, which owns YouTube, also said, "Common sense dictates that only the person who films and uploads a video to a hosting platform could take the steps necessary to protect the privacy and obtain the consent of the people they are filming." Google further claimed that European Union law gives hosting providers a "safe harbor from liability so long as they remove illegal content once they are notified of its existence."
The company also had its share of defenders online. A comment posted on Twitter by a Rhode Island filmmaker named Salim Makhlouf summed up the sentiment of many Web users: "Italy needs to catch up with the times of open networks and get off Google's back." Some bloggers compared the verdict to convicting postal workers for delivering hate mail. And in an unusual step, the U.S. ambassador to Italy, David Thorne, entered the fray, saying Washington was "disappointed" by the ruling, which he called a threat to Internet freedom. "While all nations must guard against abuses, offensive material should not be an excuse to violate this fundamental right," Thorne said in a statement.
Although the judge's written ruling has not yet been issued, the facts of the case appear to revolve around how rapidly Google responded to complaints about the video. The clip was posted Sept. 8, 2006, and was removed from the site nearly two months later in direct response to a government request. But prosecutors argued that individual viewers had sent written complaints about the video for weeks before it was taken down.
Luca Sofri, a Milan-based journalist and author of wittgenstein.it, one of Italy's most popular blogs, says that even though Google and other Web-sharing platforms attempt to strike the right balance between allowing information to flow freely on the Internet and respecting individuals' rights, they still have a responsibility for what's posted on their sites. "As Spider-Man says, 'With great power comes great responsibility.' Allowing freedom of opinion does not mean you can be a platform for people to defame others or violate their privacy," Sofri says.
Still, he suspects that the case is also an example of how out of touch Italian political leaders and magistrates are with the massive changes in the way information circulates online. "They are judging the Internet with the same instruments of the past," Sofri notes. "The Web creates situations that are completely new and don't have paragons with the world before. If these incidents are happening all over the world and Italy is the only country to condemn Google for it, maybe there's something we haven't understood."
Indeed, the verdict is just the latest in a series of clashes between Italian authorities and advocates of Internet freedom. The Interior Ministry has repeatedly attempted to shut down politically incendiary Facebook pages, and the government has also backed a measure requiring that anyone who uploads videos to the Internet have a license — a move critics say is an attempt by the government of Prime Minister Silvio Berlusconi, who owns Italy's main private TV network, to maintain control of the distribution of video content.
The two prosecutors in the Google case, however, said the verdict highlights the fact that certain values should endure regardless of technological innovation. "We are very satisfied, because by means of this trial we have posed a serious problem: that is to say, the protection of human beings, which must prevail over corporate interests," they said in a statement. Marco Bardazzi, a senior editor at the Torino daily La Stampa and co-author of a recent book about the Internet revolution, said the Italian case could mark a symbolic crossroads for Google, which was founded with the mission statement "Don't be evil." "Maybe the moment has arrived for [the company] and all of us to ask if the mission hasn't somehow been betrayed," Bardazzi wrote on his blog this week. "Or perhaps, it was a bit naive to begin with."
An Italian court convicted three Google executives of privacy violations Wednesday because they did not act quickly enough to remove an online video that showed sadistic teen bullies pummeling and mocking an autistic boy.
The case was being closely watched around the world due to its implications for Internet freedom.
In the first such criminal trial of its kind, Judge Oscar Magi sentenced the three in absentia to a six-month suspended sentence and absolved them of defamation charges. A fourth defendant, charged only with defamation, was acquitted.
Google called the decision "astonishing."
"We will appeal this astonishing decision," Google spokesman Bill Echikson said at the courthouse. "We are deeply troubled by this decision. It attacks the principles of freedom on which the Internet was built."
Those convicted were Google's global privacy counsel Peter Fleischer, its senior vice president and chief legal officer David Drummond and retired chief financial officer George Reyes. Senior product marketing manager Arvind Desikan, based in London, was acquitted. All four had denied wrongdoing.
"The judge has decided I'm primarily responsible for the actions of some teenagers who uploaded a reprehensible video to Google video," Fleischer, who is based in Paris, said in a statement.
He noted with irony that he was convicted for privacy violations despite devoting his career to "preserving and protecting personal privacy rights."
Drummond said he was "outraged" that he was found criminally responsible for the video, noting that both European Union and Italian law recognized that Internet service providers like Google are not required to monitor content that they host.
"This verdict sets a dangerous precedent," Drummond said in a statement. "(It also) imperils the powerful tool that an open and free Internet has become for social advocacy and change."
In the United States, the Communications Decency Act of 1996 generally gives Internet service providers immunity in cases like this, but no such protections exist in Europe.
The verdict could help define whether the Internet in Italy - and perhaps beyond - is an open, self-regulating platform or if content must be better monitored for abusive material. It comes as Google already is facing regulatory challenges in Italy, where a draft bill would require Internet sites to control content the same way television stations do. Google has lobbied for changes to the bill.
Google, based in Mountain View, California, had called the trial a threat to freedom on the Internet because it could force providers to attempt an impossible task - prescreening the thousands of hours of footage uploaded every day onto sites like YouTube.
Prosecutors had insisted the case wasn't about censorship but about balancing the freedom of expression with the rights of an individual.
Prosecutor Alfredo Robledo said he was satisfied with the decision because it upheld the principal of privacy and put the rights of the individual ahead of those of a business. It could force Google, and any other hosting platform, to better monitor its video, he added.
"This is the big principal affirmed by this verdict," Robledo said. "It is fundamental, because identity is a primary good. If we give that up, anything can happen and that is not OK."
The charges were sought by Vivi Down, an advocacy group for people with Down syndrome, even though the boy does not have the syndrome. The group alerted prosecutors to the 2006 video showing an autistic student in Turin being pushed, pummeled with items, and insulted by bullies at school, who called him a "mongoloid" in a mock telephone call to Vivi Down.
"Unfortunately, in Italy, the term 'mongoloid' is used as an insult, which we don't like," Edoardo Censi, president of Vivi Down, said outside the courtroom. "Our problem is the defense of our children, of the disabled ... when we learned of the video, our first concern was to remove it."
Google Italy, which is based in Milan, said it took down the video two hours after being notified by police, as is required by law. Prosecutors argued that viewers had flagged it well before police contacted Google, and the fact that it shot to the top of a "most entertaining videos" list on the Italian site, had 5,500 views and 800 comments during the two months it was online meant it should have been noticed sooner.
Thanks to the footage and Google's cooperation, the four bullies were identified and sentenced by a juvenile court to community service. The events shortly preceded Google's 2006 acquisition of YouTube.
In another setback Wednesday for Google, the European Commission in Brussels said it had asked Google to comment on allegations by rivals that it demotes their sites in its search rankings.
EU spokeswoman Amelia Torres declined to name the three rivals and stressed that the EU hadn't yet opened a formal investigation.
Google said it would provide "feedback and additional information on these complaints," but stressed it was not violating any EU antitrust rules. It said those complaining were Foundem, a British price comparison site, the French legal search engine ejustice.fr and Microsoft Corp's Ciao! from Bing.
The low rankings complaint is significant because high rankings in Google searches drive higher volumes of traffic to Web sites.
Google Inc. opened a new social hub in its e-mail service on Tuesday, leaving little doubt that the Internet search leader is girding for a face-off with Facebook.
The new Gmail channel, called Google Buzz, includes many of the features that have turned Facebook into the Web's top spot for fraternizing with friends and family.
It comes less than a week after Facebook made changes of its own. Among other things, Facebook now shows a list of friends available for chatting on the left side of the page, similar to where Gmail now displays its chat feature.
The Google Buzz features won't reach all of Gmail's estimated 176 million users worldwide for several more days. A link to the service will appear on the top left of the page, in a prominent position just under Gmail's inbox tab.
Like Facebook, Google Buzz will let Gmail users post updates about what they are doing or thinking and share those with the rest of the world or with only a select group of people. Gmail users also will be able to track other people's updates and instantly comment on them for everyone else in the social circle to see.
And, just like Facebook, Google Buzz can serve as a showcase for video, photos and Web links to interesting stories.
Google Buzz also shows similarities with Twitter, an online communications tool that broadcasts messages of up to 140 characters. A mobile phone application of Google Buzz is particularly Twitter-like: It allows people to see the public updates of other people in the same vicinity.
Some of Google Buzz's features mirror social tools already available in instant-messaging services and other Web-based e-mail, including Yahoo Inc.'s. Google Chat, which is incorporated into Gmail, already has limited ability to display status updates.
Google launched a social network called Orkut six years ago, just a few weeks before Facebook began in a Harvard dorm room, but Orkut has gained little traction outside of Brazil. Meanwhile, Facebook has emerged as a cultural phenomenon with more than 400 million users worldwide.
Google co-founder Sergey Brin seemed confident that Google Buzz will enjoy broader success.
"Every couple years something new and revolutionary emerges and thanks to the Internet it can really emerge very quickly and affect many people in a short period of time," Brin said. "I certainly hope that trend will continue and I hope we will make our own contribution with this set of capabilities."
Without mentioning Facebook specifically, other Google executives predicted the new service will do a better job of sifting through the clutter of personal updates to pull up the ones most likely to pique each individual user's interest.
Although Google remains far more powerful, Facebook poses a threat because much of the personal information shared on the site remains boxed in a "walled garden" that can't be indexed by search engines.
And Facebook has become a more alluring marketing magnet as more people spend more time there. That status threatens to siphon revenue from Google, which makes virtually all of its money from advertising.
Facebook had little to say about Google Buzz on Tuesday. "Generally, we're supportive of technologies that help make the Web more social and the world more open and are interested to see how Google Buzz progresses over time," the company said in a statement.
Facebook also declined Tuesday to comment on a report by the blog TechCrunch that Facebook is developing a new e-mail service, which would encroach on Gmail and other Web-based e-mail services.
The rivalry between Facebook and Google has been heating up since Facebook sold a 1.6 percent stake to Microsoft Corp. in 2007. Facebook stirred things up further by luring a Google advertising executive, Sheryl Sandberg, to become its chief operating officer.
Google is feeling the heat from red-hot social network Facebook.
The search giant is upgrading its Gmail program to add social-media tools similar to those found on Facebook. Google will incorporate photo and video sharing within the Gmail application, along with a new tool for status updates. Google will hold a press conference at its Mountain View, Calif., headquarters today to show off the new features.
Google is still far and away the No. 1 most-visited website, with 173 million U.S. visitors in December, according to measurement service ComScore Media Metrix, up 16% from the previous December. But Facebook is close behind.
Facebook was the fourth-most-visited site in December, with 111.8 million visitors, up 105% from the prior year.
"If Google can get you to do more things in Gmail, they can sell more ads, because you've spent more time there," says Danny Sullivan, editor of the Search Engine Land blog.
That Google would feel the heat from Facebook makes sense. Many former Google executives now work at Facebook, including Chief Operating Officer Sheryl Sandberg, who at Google helped build the lucrative AdWords pay-per-click ad program. Facebook has a similar pay-per-click program now.
Facebook invites members to share photos, videos and status updates on their personalized home pages. Advertisers reach out there with ads that are targeted by age, gender, location and more.
Wedding photographers, for instance, can reach out to women in a specific ZIP code who are engaged to be married.
"Initially, Google misunderstood social media and its significance," says Greg Sterling, an analyst at Sterling Market Intelligence. "They've got the religion now and have been trying ever since to add more social utility. Social is how the Web has evolved."
Yet he thinks that bringing social tools to Gmail doesn't make sense. "Gmail is a good product as it is. I'm not sure these tools add anything except to make it more bloated."
Google recently added a new social search feature that can in part show you "results from people in your social circle."
In order to participate, Google users first must fill out profile information, similar to Facebook, which lists interests, contacts and friends. Sullivan says few have participated because, unlike Facebook, it's not mandatory.
In the end, no matter how big Facebook eventually becomes, Sterling says it will "never take away" Google's core business: search.
"It could shave off a little search volume and might take some ads away from Google, but the end result will be small," he says.
Apple is looking like what Microsoft was 10 years ago—a Bigfoot that squeezes smaller competitors.
A former lieutenant of Steve Jobs's once told me something surprising about his ex-boss. "Steve is a monopolist at heart," he said. "He's just like Bill Gates. He just hasn't been as successful." Well, Jobs is getting there. This summer, Apple's market capitalization surged past Google's, making it the financial king of Silicon Valley. True, Apple still holds only 11 percent of the U.S. consumer PC market, according to researcher NPD, but its influence is far greater than that market share suggests. The iconic iPod dominates its market, and the iTunes music store has sold more than 5 billion songs, making it the No. 1 music retailer in America, ahead of Wal-Mart, according to IDC. Apple's iPhone is the No. 3 smart phone in the United States, according to NPD.
Not long ago Apple was just a niche PC maker selling to diehard fans who were quick to forgive (or even celebrate) Apple's quirks and foibles. But Apple is no longer an underdog. In fact, Apple has started looking like what Microsoft was 10 years ago—a company that so controls certain market segments that smaller competitors can survive only by living on its scraps or staying out of its way. (Apple declined to comment for this story.)
A year ago a small company called Vudu was winning rave reviews for its dynamite little box that attaches to the TV and downloads movies from the Internet. Vudu had advantages over Apple TV: it had a larger catalog of movies, you could rent movies instead of buying them and you didn't need to download the films to a PC first before watching them.
In January Apple struck back, introducing a vastly expanded catalog of movie titles, which it started renting, as well as selling. And it came out with a new, cheaper version of the Apple TV box that matched most of Vudu's features. Now Apple is selling or renting more than 50,000 movies a day, and Vudu is laying off staff. A spokeswoman for Vudu says the company is doing fine. I will point out only that this is what Microsoft's victims used to say, too.
The really scary thing about Apple is that it doesn't just make hit products—it controls entire ecosystems. Just as Microsoft controls both the operating system and the applications that run on top of it, Apple owns popular hardware platforms (iPod, iPhone) and operates the only store that can sell music, movies and software programs for those platforms. Apple sets prices and takes 30 percent of the money.
With iPhone, Apple decides which independent applications will be allowed, and it can pull the plug on any application at any time, without explanation—as happened in July to several developers of iPhone apps. "I spent four weeks trying to get through to Apple via e-mail and phone calls, and they wouldn't return my messages," says Cyrus Najmabadi, developer of an iPhone application called Now Playing, an online movie-theater guide that Apple yanked in July after receiving a complaint about the program. (Najmabadi persisted and finally got Apple to put his application back online; Apple declined to comment on the matter.)
With its retail stores, Apple controls another ecosystem—the market for iPod and iPhone accessories, like speakers and cases. Apple determines when accessory makers can announce new products, and charges them a variety of fees, including one for putting a MADE FOR IPOD sticker on the items. One iPod accessory maker—who insists on anonymity, as he fears reprisal from Apple—gripes that Apple takes up to 75 percent of the sales price, leaving him with zero profit on some of his products when he sells them in Apple stores. This guy plays along because having his products on display in Apple stores builds awareness of his brand, and he can make a profit selling his speaker systems through Best Buy, Target and Circuit City.
Apple's tactics might seem like smart business: why not squeeze every penny out of every deal? The problem is that if Apple squeezes too hard, some partners may go out of business, harming the ecosystem. Bully behavior also invites backlash, as it did for Microsoft when that company rose to power in the 1990s. In the U.K., a regulatory board has banned an Apple advertisement that claimed its iPhone gives you "all the parts of the Internet," when the phone won't display information created using Flash or Java, two popular Web software programs. In Alabama, a woman has filed a class-action lawsuit because her new 3G iPhone won't always attach to a 3G network, which provides faster wireless Web downloads. In July customers howled when Apple rolled out MobileMe, a new online service for synchronizing personal data to the iPhone and iTouch that wound up having some pretty serious glitches. Apple offered three months of free service to subscribers as a form of appeasement.
In the old days, stuff like this didn't matter. Apple was such a fringe player that nobody really cared how the company behaved. I wonder sometimes if Apple misses those days.
The blunt truth is that most Western forecasters have been wrong about China for the past 30 years. They have claimed that Chinese economic growth was exaggerated, that a big crisis was imminent, that state controls would fade away, and that exposure to global media, notably the Internet, would steadily undermine the Communist Party's authority. The reason why China forecasting has such a poor track record is that Westerners constantly invoke the model and experience of the West to explain China, and it is a false prophet. Until we start trying to understand China on its own terms, rather than as a Western-style nation in the making, we will continue to get it wrong.
The Google affair tells us much about what China is and what it will be like. The Internet has been seen in the West as the quintessential expression of the free exchange of ideas and information, untrammeled by government interference and increasingly global in reach. But the Chinese government has shown that the Internet can be successfully filtered and controlled. Google's mission, "to organize the world's information and make it universally accessible and useful," has clashed with the age-old presumption of Chinese rulers of the need and responsibility to control. In this battle, there will be only one winner: China. Google will be obliged either to accept Chinese regulations or exit the world's largest Internet market, with serious consequences for its long-term global ambitions. This is a metaphor for our times: America's most dynamic company cannot take on the Chinese government—even on an issue like free and open information—and win.
Moreover, as China becomes increasingly important as a market and player, what happens to the Internet in China will have profound consequences for the Internet globally. It is already clear that the Google model of a free and open Internet, an exemplar of the American idea of the future, cannot and will not prevail. China's Internet will continue to be policed and controlled, information filtered, sites prohibited, noncompliant search engines excluded, and sensitive search words disallowed. And where China goes, others, also informed by different values, are already and will follow. The Internet, far from being a great big unified global space, will be fragmented and segmented. Another Western shibboleth about the future will thereby fall. It will not signal the end of the free flow of information—notwithstanding all the controls, the Internet has transformed the volume and quality of information available to Chinese citizens—but it will take place more on Chinese than Western terms.
If we want to understand the future, we need to go back to the drawing board. China—as we can see with increasing clarity—is destined to become the world's largest economy and is likely in time to far outdistance the U.S. This process will remorselessly shift the balance of power in China's favor. Just as once a large share of the American market was a precondition for a firm being a major global player, this mantle will increasingly be assumed instead by the Chinese market, except to a far greater extent because its population is four times the size. Furthermore, China's expanding economic clout means that its government is enjoying rapidly growing global authority. It can even take on Google and be sure of victory.
Facing up to the fact that China is very different from the West, that it simply does not work or think like us, is proving far more difficult. A classic illustration is the West's failure to understand the strength and durability of the Chinese state, which defies all predictions of its demise, remains omnipresent in Chinese lives, still owns most major firms, and proves remarkably adept at finding new ways to counter the influence of the U.S. global media. Western observers typically explain the intrusiveness of the Chinese government in terms of paranoia—and in a huge and diverse country the rulers have always seen instability as an ever-present danger—but there is a deeper reason why the state enjoys such a high-profile role in Chinese society.
It is seen by the Chinese not as an alien presence to be constantly pruned back, as in the West, especially the U.S., but as the embodiment and guardian of society. Rather than alien, it is seen as an intimate, in the manner of the head of the household. It might seem an extraordinary proposition, but the Chinese state enjoys a remarkable legitimacy among its people, greater than in Western societies. And the reason lies deep in China's history. China may call itself a nation-state (although only for the past century), but in essence it is a civilization-state dating back at least two millennia. Maintaining the unity of Chinese civilization is regarded as the most important political priority and seen as the sacred task of the state, hence its unique role: there is no Western parallel.
Chinese modernity will not resemble Western modernity, and a world dominated by China will not resemble our own. One consequence is already apparent in the developing world: the state is back in fashion; the Washington Consensus has been eclipsed. In this new world, Chinese ways of thinking—from Confucian values and their notion of the state to the family and parenting—will become increasingly influential. Google's fate is a sign of the world to come, and the sooner we come to appreciate the nature of a world run by China, the better we will be able to deal with it.
Even before jan. 12, 2010, life was pretty good for Robin Li. The soft-spoken 41-year-old is the co-founder and chief executive of Baidu.com, the dominant search engine in China, the country with the most Internet users in the world. His stake in the company — started in 1999, five years after getting his M.S. from SUNY Buffalo in 1994 — is worth about $2.8 billion now. That makes him the seventh richest man in China, according to the annual rankings in Forbes magazine. Though he's been a computer geek since his undergraduate days at Peking University, his boyish good looks hardly fit the profile, and as a result he's attained rock-star status in China, particularly among female Netizens (even if he is happily married and the father of three young daughters).
But then came Jan. 12, and for Li and Baidu, things went from the sublime to the ridiculous. That's the day Google drew its now famous line in the sand, saying it was no longer willing to censor its Internet searches in China — as the authoritarian government demands — given what it believes have been repeated attempts by Chinese authorities to hack its systems and steal dissidents' Gmail addresses. However noble Google's sentiment may be, in business terms it was "effectively a suicide note" when it came to the search business, as one rival Internet executive put it. "Google is done in China, at least for now." If you Google Baidu, nearly every press story that pops up will mention its fierce rivalry with the Mountain View, Calif., company. Baidu executives now don't quite know what to make of the prospect of life without it. "Things have gotten very strange very quickly," says one.
Not that Baidu's shareholders are likely to complain. The company already collects 64% of the revenue generated by search engines in China via advertising, according to Analysys International, a market-research firm, and claims 76% of overall search traffic. The comparable figures for Google are 31% and 20%. If Google soon shuts down its Chinese search engine (Google.cn) — as most analysts believe it will — Baidu will grab even more. Dick Wei, senior analyst at JPMorgan Securities in Hong Kong, estimates that if Google loses a quarter of its China traffic, Baidu will reap a 6% gain in revenue; the gain would be 12% if the number of eyeballs logging onto Google shrinks 50%. For the last full year completed, 2008, Baidu generated $468.8 million in revenue and earned $153.6 million. Though they haven't yet reported full-year 2009 results, Baidu's stock soared from just shy of $390 per share immediately prior to Google's dramatic announcement to more than $465 per share, before retreating slightly on Jan. 19. Google at the same time fell from $595 per share just before the announcement to $540 Jan. 25.
It's easy to see the Baidu story as so many in China now do: Chinese upstart whips the American Goliath. But it's more complicated than that, as Li is the first to admit. The fact is, Baidu's success resembles a typically American success story. Li was born in an impoverished town about 200 miles (320 km) from Beijing, and as a young man was smart enough to get into Beida, as the Chinese call Peking University. Like so many students of that era — just after the government's assault on demonstrators in Tiananmen Square — he wanted to go to graduate school in the U.S. "Back then," he has said, "China was a depressing place." Li applied to 20 universities with computer-science programs. Only one, the State University of New York at Buffalo, offered him a scholarship. "So I packed up my winter coat," he joked in an interview with Time last spring, "and went."
After getting his master's degree in computer science, Li became a consultant for IDD in 1994, then a financial-database company that was a subsidiary of Dow Jones. Even then, Li says, he was "intrigued with search," long before it became the hugely powerful, money-spinning machine that it is today. At IDD he developed an algorithm that ranked the popularity of various websites. He then got recruited by Infoseek, a company that had developed one of the first search engines in the mid-'90s — only to see Walt Disney acquire the company and shift its focus. (Yes, the Mouse House could have been Google before Google.) So in 1999, he and a friend did what Silicon Valley entrepreneurs do: they raised $1.2 million in venture capital, added another $10 million to that the next year, and started up Baidu back home in Beijing.
The company turned its first profit in 2004, and went public on the Nasdaq the following year, raising more than $100 million in the process. It was by far the most successful Internet IPO since the dotcom bubble burst in 2000. One of its earliest investors, in fact, was Google — before the company entered the China market in 2006. It paid $5 million for a 2.6% stake in Baidu in 2004. But Google sold its stake in Baidu for about $60 million two years later, and entered the search business in China on its own. It was game on.
Baidu got traction in its home market by focusing its search engine on China-centric information. "Initially, we were better [than Google] on stuff a Chinese Internet user would search for," says one insider. "They've since closed that gap somewhat, but that emphasis early helped us get and maintain our lead.'' Baidu has also introduced a question-and-answer service called "Baidu Knows," which is a hit. And the company just won a big legal battle when a popular music-download function it offers was cleared of copyright infringement by a Beijing court. The complaint had been brought against Baidu by major Western music labels.
Critics say that Baidu has won favor with the government through its rigorous self-censorship. (Punch in "Tiananmen Square 1989" and you'll mostly get results about security arrangements for the 2008 Olympics and last year's celebrations for the 60th anniversary of the founding of the People's Republic, with only a few sanitized references to the student demonstrations.) Authorities have certainly scrutinized and disrupted Google's China operations far more frequently than Baidu's (one former Google employee calls it "operational harassment"). But it's not at all clear that it made much of a difference to the bottom line.
There have been times, in fact, when the Chinese government, in the form of its state-owned media, has turned on Baidu. In 2008, CCTV, the powerful state-run television network, aired reports on the site's habit of serving up unlicensed doctors and illegal pharmacies in response to medical queries on its engine. It turned out those were Baidu advertisers. The disclosures hit directly at the site's integrity and temporarily crushed the stock. Baidu has only just finished rolling out a new program that will delineate paid results from general searches, but that remedy has taken more time than some analysts expected. And recently two senior executives — the chief operating officer and the chief technology executive — resigned for "personal reasons." (A Baidu spokesperson says those reasons had nothing to do with performance and that the two executives left to pursue other opportunities.)
Baidu's flaws would mean more if Google were sticking around. If it's not, Baidu will have the world's most populous country almost to itself. And that won't be a good thing for anybody. "The lack of a strong second player may unmotivate Baidu to improve" is how JPMorgan's Wei puts it. The company has gone from a Silicon Valley start-up, in a field that didn't then exist in China, to a nimble competitor that was challenged by the global king — and won. The risk that one day it could turn into a hoary monopoly simply because it lacks a serious competitor in its home market was a preposterous notion when the new year began. It's not now.
When President Richard Nixon opened the U.S. door into China in 1972, the transcript of his secret meeting with Chairman Mao Zedong at his Peking residence was classified for 25 years.
When Google announced Tuesday it wouldn’t censor its Google.cn search engine anymore — all but committing the “Don’t Be Evil” internet giant to a self-imposed China exile — it took just seconds for its blog post announcing the decision to careen around the world.
Google came to China in 2006, with much of the same optimism that Nixon brought — a belief that engagement would be good for both, and would lead to freedom and prosperity for China’s citizens. The sprawling new condos and shiny American-branded cars in Shanghai seemingly attest to some level of Nixon’s success.
“What brings us together is a recognition of a new situation in the world and a recognition on our part that what is important is not a nation’s internal political philosophy,” Nixon told the chairman, according to a declassified transcript of the historic meeting. “Therefore, we can find common ground, despite our differences, to build a world structure in which both can be safe to develop in our own ways on our own roads.”
With engagement, China has flourished financially with a massive expansion of trade and economic growth, but long-sought political reforms have not followed. China is still ranked as among the world’s worst performers on issues like human rights and pollution controls. Now Google’s confrontation over censorship there has raised anew uncomfortable questions about the costs of accommodating China at a time when the government appears to be tightening rather than loosening its grip. China may be too big to ignore, but when is enough enough?
Different approaches in different countries have produced varying results.
When it comes to smaller nations like North Korea and Iran, the view is stick it to them enough and they’ll suffer enough and will come around, said Susan Kohn Ross, international trade counsel at Mitchell Silberberg & Knupp in Los Angeles.
“People actually made a conscious decision not to purchase things made in South Africa. That led eventually to the end of apartheid,” she said.
But the formula is not foolproof. “There is a whole community out there that will take the position that typically unilateral sanctions don’t work,” Ross added. “We’ve tried that in Cuba and it obviously hasn’t worked. International relations are never easy.”
Certainly, they haven’t been for Google, which agreed to censor search results in China while maintaining the right to tell users searching for forbidden terms like “June 4″ or “Tibet” that it was filtering information. That made Google far more informative than local search sites like Baidu, which still controls the majority of Chinese search traffic.
To be sure, that elevates Google and other Silicon Valley services like Facebook and Twitter as invaluable in times of social upheaval, just as publishers were centuries ago, according to UC Davis law professor Anupam Chander, who is writing a book on what he calls the “electronic silk road,” a reference to the old, overland trading route that connected China to the Western world.
“If you look to history, you find that publishers often served as voice for political dissidents,” Chander said. “You can go back to Galileo and the Inquisition, when a Dutch publisher goes to Italy and smuggles out the manuscript … and goes back to Protestant Northern Europe where this is permitted and publishes his last treatise,” Chander said.
And now Silicon Valley has finally begun to realize that it can be publishers of dissident speech better than any other set of companies in the world, according to Chander, referring to Google’s decision, and Facebook’s and Twitter’s support of Iranian dissidents.
“That’s crucial for Silicon Valley to recognize, and they now see themselves as doing more than creating a social network for sharing photos and see themselves as places to share information about politics and culture,” Chander said.
Google went to China hoping it would be a force for good, and that its decision to compromise its principles would be balanced out by the good that its search engine would bring to Chinese citizens. In 2008, it reported to Congress about a Reporters Without Borders finding that it was censoring far less than other Chinese search sites, including those run by Baidu, Yahoo and Microsoft.
Then came a series of high-profile scandals in China — milk poisoning and shoddily constructed buildings that collapsed in an earthquake — information that had been censored by the government and, by default, search engines including Google. That led some in China to turn to Google.cn, rather than Baidu, because Google would at least tell people when information was being censored — even if the information was missing.
To Google, it looked as though the Chinese public was learning through Google that its government was censoring them, and gave the company hope that its Faustian bargain with China was paying off and leading to a new age of freedom in China, according to an industry source familiar with Google’s situation in China.
But 2009 turned out to be the Year of the Censor in China. The Chinese government decided to mandate censorship software called Green Dam in all new PCs (to which manufacturers acquiesced). In March it blocked YouTube due to videos of anti-Tibetan violence, a block that remains. Then the government began hammering on Google, claiming the search engine was steering too many to pornography. The list of forbidden search terms kept growing.
And then Google announced Tuesday it had been the target of a “highly sophisticated” and coordinated hack attack against its corporate network, and that the hackers had stolen intellectual property and sought access to the Gmail accounts of human rights activists, the very people who Google wanted to help when it entered the country. The attack had originated from China, the company said.
That, according to the source, was the final straw, leading Google co-founder Sergey Brin to finally say enough was enough, and that Google wasn’t going to censor search results anymore.
Making Google’s decision all the more difficult is the dual-use nature of communications technology — which can simultaneously be used by citizens to communicate and by governments to spy on citizens, said Leslie Harris, the president of the Washington, D.C., advocacy group Center for Democracy and Technology.
“Their core business is giving people more access to information and helping people collaborate,” said Harris, whose group applauded Google’s decision. “Their core business is a human rights-enhancing technology. Here the government sees the net as a threat to its control and a way to control the population.”
Google will likely shutter Google.cn and its China offices — largely abandoning a market of 340 million current internet users — since it unequivocally said it was no longer willing to censor search results. That leaves the Chinese very little room to negotiate or save face, as evidenced by its statement Thursday that it would not back down.
The entire world has been talking about Google’s decision to not censor its China search engine after it became the victim of Chinese cyberattack. And while we’ve talked a great deal about its global implications and the censorship in China, we haven’t talked a lot about exactly how Chinese hackers actually broke through Google’s security measures.
A recently published analysis by antivirus/computer security firm McAffee seems to have some of the answers.
They have launched an investigation into the attack has turned up some interesting results, including the likely codename of the operation as well as a key vulnerability in Microsoft’s Internet Explorer that may have helped the hackers succeed.
The Logistics of the Attack
McAffee begins by stating that it discovered a previously unknown vulnerability in Internet Explorer that was exploited by the malware used in the attack. Microsoft has been informed of the exploit and responded, saying they’re developing an update to counter the vulnerability.
Here’s McAffee’s explanation of the vulnerability:
“As with most targeted attacks, the intruders gained access to an organization by sending a tailored attack to one or a few targeted individuals. We suspect these individuals were targeted because they likely had access to valuable intellectual property. These attacks will look like they come from a trusted source, leading the target to fall for the trap and clicking a link or file. That’s when the exploitation takes place, using the vulnerability in Microsoft’s Internet Explorer.
Once the malware is downloaded and installed, it opens a back door that allows the attacker to perform reconnaissance and gain complete control over the compromised system. The attacker can now identify high value targets and start to siphon off valuable data from the company.”
The attack targeted a few key individuals to install malware and rip open a hole through security via Internet Explorer. McAffee made sure to note that the IE flaw was just one way the hackers infiltrated the networks of Google and 20+ other companies.
As for why McAffee believes that the attackers called the operation “Aurora,” here’s their explanation as well:
“Based on our analysis, “Aurora” was part of the filepath on the attacker’s machine that was included in two of the malware binaries that we have confirmed are associated with the attack. That filepath is typically inserted by code compilers to indicate where debug symbols and source code are located on the machine of the developer.”
Overall, while Microsoft and IE seem to be partly to blame, the attack was sophisticated and executed on multiple fronts. In fact, Verisign iDefense not only claims that the Chinese government was behind the attacks, but that compromised Adobe PDFs were also to blame. However, Adobe disputes this notion.
The hackers knew who they wanted to target and what they wanted and used vulnerabilities never before known to do it. The nature of the attack likely played a big role in Google’s decision.
To train a new generation of leaders, the search giant sends young brainiacs on a worldwide mission.
Summer Abroad: (Left to Right) Baum at the Western Wall; Siroker bonds with Indian villagers; Google APM Kim hunts for gadgets in Akihabara
There are no computers in the tiny village of Raagihalli, located 30 miles outside Bangalore, India. Overseas visitors seldom venture down the unpaved roads that lead to the 70 or so threadbare huts surrounded by fields vulnerable to the trampling of elephants. So it is fair to say that cultures clashed with the arrival of the Googlers—young masters and mistresses of the Internet, armed with stratospheric SAT scores, computer-science degrees from top universities and some of the most coveted jobs of their generation. This past summer a group of 18 Google associate product managers (APMs) were circling the globe on a training trip, seeing firsthand the humble, unwired ways of life experienced by billions—including the vast majority of Indians who are more familiar with crop fields than search fields.
The occasion begins awkwardly, as villagers line up to greet the visitors, pushing their children forward to introduce themselves and accept notebooks and pencils from Marissa Mayer, a Google vice president. Mayer wisely cuts this Angelina Jolie moment short, urging the Googlers to mingle.
"Have you ever heard of Google?" asks APM Alex Vogenthaler of a smiling man about his age of 27. "No," is the reply. Vogenthaler tries to explain what Google does. "It's a computer corporation?" the man asks, clearly puzzled. Other APMs, dodging the cows that roam freely through the village, peek into the concrete-floor houses and a schoolroom with almost no books or supplies. (Though many of the villagers have mobile phones.)
"This brings a whole new meaning to what's on the back of my shirt," says APM Dan Siroker, 24. He is referring to a T shirt with the company logo in front and, on the back, the now classic phrase on the company home page: I'M FEELING LUCKY.
LUCKY, indeed. Siroker has hit the job jackpot. Raised in Google's backyard of Palo Alto, Calif., he graduated with a degree in computer science from Stanford and, with the math prowess of a nerd and the schmoozing skills of a car salesman, could have gone anywhere. His choice was Google, and he was accepted in the APM program, which seeks brilliant kids and slots them directly into important jobs—no experience necessary. Surprisingly, Google trains these young execs, knowing many will leave for other jobs in just a few years.
Halfway through the two-year program, the APMs travel to foreign Google offices to network with fellow employees, learn about regional markets and soak up local culture. NEWSWEEK tagged along on this year's trip, a marathon 16-day visit to four cities. Traveling with the APMs provided a rare look into Google itself—its management philosophy, its values and its attempts to maintain its vision in the face of tremendous growth.
Doing their best to ignore typhoon Man-Yi, the Googlers take a walking tour of Tokyo's Harajuku district (apparently their brainiac status does not extend to the concept of getting out of the rain). Jini Kim, 26, is stressed. In four days she has a huge presentation that she'll make via Internet to several Google board members. So while helping to manage the activities in Tokyo, she is working deep into the night. The only APM who didn't study computer science—she studied political science and classics at Berkeley—she turned down prestigious scholarships to take the Google job.
Kim was assigned to a still-under-wraps service called Google Health, and had an idea to spin off her own project, a step requiring approval from one of Google's top executives. She targeted Larry Page. But since Page and cofounder Sergey Brin had jettisoned their assistants last year, arranging time with him was a challenge. By charting Page's movements she successfully waylaid him one day and got the go-ahead for her project. "I'm getting really good at stalking," she says.
This sort of enterprise was exactly what Google was hoping for when it began the APM program five years ago. Earlier attempts to hire veterans from firms like Microsoft had awful results. "Google is so different that it was almost impossible to reprogram them into this culture," says CEO Eric Schmidt. The difficulties led Google VP Mayer (employee No. 20) to wonder whether experience was way overrated. The earliest Google employees were distinguished by an abundance of brain cells as opposed to a fat r?sum? or a stint at McKinsey. Why not replicate the phenomenon?
APM No. 1, hired July 2002, was newly minted Stanford grad Brian Rakowski. "You're going to be responsible for Gmail," Mayer told him, explaining that he was to launch a product designed for tens of millions of users. "I was 22 years old, and shocked that they were going to let someone that young and inexperienced do that job," says Rakowski, who is still working at Google. He succeeded by a combination of technical acumen (necessary so the engineers, Google's true royalty, wouldn't write him off as a bozo) and the good sense to lead with wit and enthusiasm.
Now Google has marked its hundredth APM hire. "These are smart people, at the top of their class, but also who have done something entrepreneurial—editor of the yearbook, or started a company," says Jeff Ferguson, the recruiter for the APM program. "I can tell within five minutes if someone is right for this," he says.
In each city, the APMs visit the local office—here in Tokyo, located in hip Shibuya. They share the product "road map" for the next year with the local employees, answer questions and then hear what the engineers and managers in each location are focusing on. They also get a sense of the marketplace in each country by talking to local Googlers, customers and partners. In Tokyo, they learn that Yahoo Japan is clobbering the competition—"It's like Google and AOL and eBay rolled into one," says one manager. But Google has captured the imagination of the Japanese people—it's the No. 2 brand in the country, behind Toyota.
Tokyo's legendary electronics district, Akihabara, is the staging ground for the first of several competitions held during the trip, ostensibly to sharpen the product knowledge, business skills and street smarts of the APMs. They are broken up into teams and given $100 to buy the weirdest gadgets they can find. Diving into stalls full of electronic gizmos, they find things like a USB-powered smoke-removing ashtray and a stubby wand that, when waved back and forth, spells out words in LED lights. The latter proves the eventual winner. "For three years, a team has bought this gadget," says Mayer. "But this is the first time someone has managed to get it to work."
The instant their plane arrives in Beijing, the APMs pull out their BlackBerrys—which hadn't worked on Japan's communication system. Google runs on instant communication, and the typical APM gets hundreds of e-mails a day, with no hours off-limits.
When the APMs finally lift their heads, they come face to face with the realities of doing business in China. As explained by the head of Google here, Kai-Fu Lee, balancing the company's freewheeling style with China's government rules—and censorship—is a delicate balance.
At the Google office, the APMs conduct interviews with local English-speaking consumers. It's striking how effective the Chinese government has been in tilting the playing field to benefit the home team, Baidu.com, by occasionally blocking access to Google's site and by insinuating a nationalistic element into the choice. The message gets across: "Baidu knows more [about China] than Google," a young man wearing a Brasil Soccer shirt says matter-of-factly.
On the bus back to the hotel one night after a dinner featuring donkey meat (surprisingly tasty) and deer tendon (yuk), APM Frances Haugen conducts an informal survey of her colleagues. A surprisingly high percentage have skydived. Most seem to have parents who teach at universities (as was the case with Brin and Page). Haugen, from Iowa City, is herself the daughter of a biologist. She heads the team that analyzes customer results for the multibillion-dollar Google AdWords product, which places sponsored links on search-results pages. Only at Google would such a job be entrusted to a 22-year-old. She had to coordinate a staff of almost 20, including 11 engineers. "It was very hard for me. Some of them are twice my age. Being a product manager is like herding cats." The intense responsibility is something they all must deal with. Prem Ramaswami, the 25-year-old APM who "owns" Google Checkout (an online-payment application), recalls telling his father about his job and encountering utter disbelief. "They can't possibly be letting you do this," his dad said.
Google helps APMs to cope by supplying a support structure. Each has an APM "buddy," a mentor and an outside management coach: "It's like a therapy session," says Nick Baum, 24, the APM for Google Reader, which organizes feeds from users' favorite Web sites and blogs. Eventually the APMs learn the secret of leading a team of world-class engineers that they can't boss around—what an early APM calls "charismatic authority." The idea is to make yourself helpful to the engineers and gather hard data (much more useful than rhetoric at Google) to back up your vision of where the product should go.
Actually, being an APM is a great way to hone negotiation skills. Kevin Tom, 22, who heads the Desktop Search team, found himself bargaining with a major computer company to get the Google software included on the firm's PCs. "I realized that this isn't something someone my age should be doing," he says. "We presented to them, and they said 'no,' and then we flew out there, for eight or nine days at the site, negotiating. Five days in, I realized I would get the deal done." Who needs experience?
In Bangalore the traffic is heart-stopping, the poverty disturbing, and a couple of APMs get sick from the food. And the trip to the village, while fascinating, leaves a bad taste for some. "We should have given them more than candy and notebooks," says APM Tom Tunguz, 25. But the meetings at the Bangalore offices are instructive, as the APMs learn that the company's most popular application in India is its social-networking site, Orkut—even more popular than search, though Google is the leader in that, too. A local tech leader clues them in on the advertising market ("Bollywood is everywhere … Cricket is king …"). Every couple of hours the lights dim and then come back on as the on-site generators kick in. "Welcome to India," says Shailesh Rao, the Google country manager.
The pace of the trip is starting to catch up to the Googlers as they wing toward their final overseas destination, Tel Aviv.
Actually, being an APM is a great way to hone negotiation skills. Kevin Tom, 22, who heads the Desktop Search team, found himself bargaining with a major computer company to get the Google software included on the firm's PCs. "I realized that this isn't something someone my age should be doing," he says. "We presented to them, and they said 'no,' and then we flew out there, for eight or nine days at the site, negotiating. Five days in, I realized I would get the deal done." Who needs experience?
In Bangalore the traffic is heart-stopping, the poverty disturbing, and a couple of APMs get sick from the food. And the trip to the village, while fascinating, leaves a bad taste for some. "We should have given them more than candy and notebooks," says APM Tom Tunguz, 25. But the meetings at the Bangalore offices are instructive, as the APMs learn that the company's most popular application in India is its social-networking site, Orkut—even more popular than search, though Google is the leader in that, too. A local tech leader clues them in on the advertising market ("Bollywood is everywhere … Cricket is king …"). Every couple of hours the lights dim and then come back on as the on-site generators kick in. "Welcome to India," says Shailesh Rao, the Google country manager.
The pace of the trip is starting to catch up to the Googlers as they wing toward their final overseas destination, Tel Aviv.
But Israel re-energizes the travelers, both for the beach outside the hotel and the similarity of the local tech scene to Silicon Valley. Google has asked Yossi Vardi, a top investor in start-ups, to bring in a lineup of new companies that will present short pitches to the APMs. That night he hosts a party at a funky garage where the local geeks have built a robot that plays Guitar Hero. Vardi is also present the next morning at a big event where the Googlers are greeted by hundreds from the Israeli tech community. "I have one thing to tell you," Vardi says to a few APMs who've gathered around him. "When you are offered a deal, you can say yes or you can say no. But never, never be arrogant."
It is but one of many lessons the APMs are absorbing on their path to becoming leaders. And not necessarily leaders at Google: almost none of the APMs sees him- or herself at the company in five years. This is only one of many employee concerns for Google. When most of these APMs were hired barely a year ago, the company was about half the size it is now. Try as Google may to keep things "flat"—meaning that there are very few layers of reporting and one doesn't have to go through channels to talk to a higher-up—the demons of process cannot be held at bay permanently. At times during the trip the APMs can be overheard having quiet conversations about creeping bureaucracy. Even though some of the APMs' parents think that their kids work for "a hippie company," it's getting less so every year.
And Google's no longer the new kid on the block. A few months ago an APM left Google for Facebook and wrote a mass e-mail, where he described his new home as "the Google of yesterday, the Microsoft of long ago." Some high-profile stars have left Google recently, including Bret Taylor, the former APM who launched Google Maps. "There's less of an entrepreneurial feel now" at Google, says Taylor, whose new start-up is called FriendFeed.
After hearing a brief performance by a Druze musician atop Mount Carmel, Mayer addresses the possible exodus of these APMs. That kind of restlessness, she says, "is the gene that Larry and Sergey look for. We get two to four good years, and if 20 percent stay with the company, that's a good rate. Even if they leave it's still good for us. I'm sure that someone in this group is going to start a company that I will buy some day."
The last gathering of the full group occurs in a tent in the Negev Desert, where nighttime activities include a midnight walk with a Bedouin guide and a drumming session. It is nearly 2 a.m. when the group gathers in a circle: there is storytelling and singing. Kim leads everyone in a tune she often sings to her brother—"Rubber Ducky." The APMs, all bred on "Sesame Street," hit every note. But the trip feels over. Maybe the lasting legacy of the trip will be the bonding, one more cluster in a Google mafia that will make its mark on new products and technology, both inside and outside the company. Google's top people hope that it happens inside. "The APM program is one of our core values," says Eric Schmidt. "I'd like to think of one of them as the eventual CEO of the company. I just don't know which one."
When President Richard Nixon opened the U.S. door into China in 1972, the transcript of his secret meeting with Chairman Mao Zedong at his Peking residence was classified for 25 years.
To be sure, that elevates Google and other Silicon Valley services like Facebook and Twitter as invaluable in times of social upheaval, just as publishers were centuries ago, according to UC Davis law professor Anupam Chander, who is writing a book on what he calls the “electronic silk road,” a reference to the old, overland trading route that connected China to the Western world.
