Google.cn Situation is Making My Reptilian Lawyer-brain Hurt

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I’m a proud man, but I know when to admit defeat, and after reading a whole bunch of press accounts of the latest spat between Google and Beijing, I’m still kind of in the dark. I think I’m getting hung up on their business model, which I guess I don’t understand as well as I thought. Their corporate structure, regulatory licensing, and various other applicable Chinese legal issues — no problem. But the business itself . . . I think I need a little help.

News flash. For those of you who spend most of your time living under rocks, eating moss and drinking rainwater, you may be unaware that Google.cn decided to suspend its self-censorship of search results in March, at which time they were politely told by the government here that since that was against the law, it might be a good idea to stop the domestic Google.cn service.

Google in fact did so, sort of, by redirecting users to its Hong Kong site. If my understanding is correct, mainland users are getting pretty much the same experience they would get as if they accessed Google.com, which is often what I do when I need a little English search engine goodness.

Sites offshore do not have to censor, but their contents are still subject to the Great Firewall. This means that 1) if I type in a forbidden search term, my attempt to access Google will result in a crash that will not reset for a minute or two; and 2) even if I do get search results that include forbidden topics, when I try to click on those sites (assuming they are blocked), I will be frustrated in the attempt.

Similarly, if I do an image search on Google.com, there are often a lot of blank image results, no doubt naughty stuff that I shouldn’t look at. I often wonder, though, why there are so many blocked images that pop up from the search of keywords like “income gap,” “RMB value,” and “copyright infringement.” Just what sort of twisted stuff am I missing?

Anyway, I had assumed that the Hong Kong redirect basically resulted in the same thing. Maybe I was wrong? I still can’t figure it out.

Beijing certainly doesn’t like it. Even though the government can still filter sites or pages via the GFW, it still doesn’t want Google.cn redirecting to results on Google HK. Google’s fallback position seems to be the change it from a direct link to an indirect one (users are sent to the HK page itself for searching). Somehow I doubt that this distinction is going to be persuasive.

So I’m wondering, why should Beijing care if folks here can get to Google HK? They can get there directly by typing in that URL anyway, and there are plenty of other Google sites, including the .com, that operate in the same fashion. The draw for the HK site, of course, is the Chinese language capability and search scope, but let’s put that aside for the moment.

And then I realized something when I put my lawyer hat back on. Google’s current problem is that it is applying for a renewal to its ICP license, a mandatory regulatory approval that all similar sites must obtain to do business here. As long as Google follows China law, it should be able to get its ICP license renewed.

But wait. Yes, back in March when they decided to stop filtering, they shut down the local search service. However, in redirecting to the HK site, what exactly was the company doing? What exactly is Google.cn these days, as far as its operations are concerned?

This is where I frankly get confused. Google.cn is not a search engine any longer. The information you get from that site is really coming from Hong Kong (in fact, users are accessing the information from the HK site). Given that reality, Google is still asking the government to recognize it as a China mainland site that is deserving of an ICP license so it can continue to sell ads.

I don’t get it. If I went out tomorrow and set up a U.S.-based web site that was chock full of content, and then I set up a Chinese company that did nothing but redirect to that U.S. content, there’s no way I’d get an ICP license approved. Despite my attempt at getting local revenue, I would not really be operating as a local web site — my server would be in the U.S.1

One further issue. What should the Chinese government do with Google’s pending application? I’m no fan of censorship, but if Google is not really operating a Chinese site, then they shouldn’t get an ICP license. I feel like I’m missing something here, but that’s where I am at the moment.

If I take politics into account, then I’m definitely going to piggyback on Shaun Rein’s advice to Beijing:

The smart move would be to delay making any decision on Google’s license approval until the issue dies down again in the overseas press. It should neither approve nor deny for the moment, but let the status quo continue.

Makes a great deal of sense. I suspect that Shaun is predicting a negative result for Google, otherwise a delay of that nature would be unnecessary. At this point, I’d have to agree with that as well. Sure, a delay on the regulatory approval would only benefit the government, and besides, the way things are going for Google.cn right now, there might not be a hell of a lot left in a few months anyway.

If anyone would like to educate me on Google’s China business model and fill in some gaps, feel free to comment, send me an email, or look for me lurking on Twitter (@chinahearsay). In the meantime, I’ll have to be content with reading Elizabeth Lynch’s excellent post on Google at China Law & Policy.

  1. Yes, I understand that there are some exceptions. But generally, if you are running an online business in China and have an ICP license, your server should be here. []

7 responses on “Google.cn Situation is Making My Reptilian Lawyer-brain Hurt

  1. Stefan

    Google still runs ditu.google.cn on a Chinese server, as it is is now required to do by law for maps intended for Chinese netizens Not sure if that is sufficient to count as a commercial or significant operation on google.cn, but the Chinese Google Maps does serve ads in popups or along the side of the map.

    1. Stan Post author

      If that’s all that Google was doing here (revenue wise), then no problem. I suspect that is not the case, though.

  2. Elizabeth

    Great post and thanks for the shout out. In terms of Google’s business model, the other thing that caused me to scratch my head and didn’t make it into my article, was why do the automatic redirect from Google.cn to Google.com.hk for the past six months? Google keeps saying that the reason it needs to maintain Google.cn is because their mainland users don’t know to type in Google.com.hk in the address bar. So they have to train their users to start going to that site on their own. But then why waste your time on the autonomic redirect for the past six months? It’s only been since Monday that Google.cn says that they can now be found at Google.com.hk and that people should go there – shouldn’t they have started that in March when they pulled out? I mean, these guys poked their finger in the eye of the Chinese government in January. Did they really think that a complete shut down of the Google.cn site was not a possibility??? Why didn’t they start training their users to update their favorites and go to Google.com.hk back in January? It doesn’t make sense to me – they have smart people working there. How could they not have had a contingency plan for a shut down of Google.cn and work on that for the past six months? I’m left just thinking it must be hubris. And I can’t find another reason but am open to hearing from others.

  3. Paul Denlinger

    Strictly speaking, Google is not a content company, it just creates a database, which is an index of links to other sites, and which consumers can search against in real-time.

    Google.cn and Google.com are separate DBs, with Google.cn having a purged DB of content which was not acceptable to the Chinese authorities.

    Now, the twist which makes things complicated is that search results are then sold to businesses and advertisers on the search results page. Having this requires a commercial license under PRC law. (I am not the final authority on this, but you can check with the legal requirements.)

    The ICP is required because of the need to keep in conformity with the Chinese government’s content licensing requirements, but the real key is the advertising license, which allows Google to generate advertising income from the PRC. Google’s entire business model all over the world is based on selling advertising which is placed on its search results pages and content networks.

    1. Stan Post author

      Thanks for the info. I’m still thinking like a lawyer, though, and I’m focused on the licenses. The ad license is crucial but not a big deal to get. It’s available to JVs and has no relation to Google’s current problems. The ICP license is another story; that’s what they need to be running a commercial Net business in China (I actually am an authority on this bit). To do so, you generally need a server here. I still cannot square this ICP requirement with their attempt to move a lot of this offshore.

      If I have this right, we’re talking about selling ads using an online platform to local companies related to content in an offshore database. Either way I look at it, I still see the need for an ICP license. It’s still a Net business and as such has onshore requirements, which include content restrictions. If you really do everything offshore, that’s something entirely different.

      1. Tim

        Stan,

        It was my understanding that Google, or any company for that matter, would need an ICP license to host a website in China; regardless if they were using it as a revenue generating platform. In this case this is what Google.cn is currently doing. I admittedly have not researched this as well as you, but have you read that they still are operating their google ads within China?

        If not, then the ads that are being bought are done so offshore in HK. In this case the Google.cn website is a placeholder and not generating ad revenue but rather redirects traffic offshore where these ads are being posted and actually generating revenue.

        But having read your post I believe I am missing something.

        Tim

        1. Stan Post author

          The licensing issue is a bit more complicated than that. There are two different levels of licensing (the English translations are never consistent, unfortunately), one for simply hosting a site in China and another for operating certain kinds of sites (content, web biz, etc.). When we say “ICP license” in terms of Google’s business, we are talking about the higher-level permit, not the simple one that everyone needs.

          As far as revenue is concerned, if they are generating revenue via their online platform here in China, then they would need that higher-level ICP license.