On January 12, 2010, Google announced that a major attack launched against its network from hackers inside China (aimed at exposing the Gmail accounts of Chinese human rights activists) had prompted it to consider abandoning its Chinese operations and reconsider its 2006 agreement with the Chinese government to censor search results in the country.

“Google is failing in its mission to make the world’s information accessible and useful to Chinese Internet users”₁ was a line used by the Vice President for Global Communications and Public Affairs in 2006. Less than four years later in January of 2010 Google announced that due to “a highly sophisticated and targeted attack on [their] corporate infrastructure originating from China… [Google is] no longer willing to continue censoring [their] results on Google.cn”₂ . Since then things have progressed. China has completely denied any involvement in the so-called cyber crimes ₃ and Google CEO Eric Schmidt, speaking at the World Economic Forum in Davos, Switzerland has said that he hopes “to apply some negotiation or pressure to make things better for the Chinese people.” ₄

So is this Google finally living up to its corporate mantra “Don’t Be Evil” or is it simply corporate positioning of a multinational corporation? The fact that Google entered the Chinese market in 2006 and agreed to censor their results demonstrates the willingness of the company to comply with the law in the countries in which it operates and simultaneously demonstrates its lack of concern for local politics, no matter how controversial. Could the so-called cyber attacks which Google claim were the final straw merely be an ideal opportunity to exit a poorly performing market?

“This wasn’t in my opinion ground-breaking as an attack. We see this fairly regularly,”₅ was a statement by Mikko Hypponen, of security firm F-Secure.  ”This goes on all the time. Of the Fortune 100 companies, all 100 are under some sort of attack all the time”. In fact evidence has recently surfaced that Google actively assists governments in democratic societies with access to its properties including Gmail (it’s online email client). Bruce Schneier, a security technologist and renowned technology author recently announced that “In order to comply with government search warrants on user data, Google created a backdoor access system into Gmail accounts. This feature is what the Chinese hackers exploited to gain access.”₆ “Democratic governments around the world — in Sweden, Canada and the UK, for example — are rushing to pass laws giving their police new powers of Internet surveillance, in many cases requiring communications system providers to redesign products and services they sell.” So we must now question why did Google decide this particular attack was newsworthy and why take such a monumental step of pulling out of one of the largest potential markets in the world?

In 2005 Google’s market share was 33.3%1 The announcement to censor results in China published in February of 2006 was intended to slow the nose diving market share if not aimed to increase it. However according to Jennifer Li, Baidu’s chief financial officer, “Baidu’s market share for search in China was about 77% in the third quarter [of 2009], up from 75.6% in the second quarter [of the same year]. Google [she says], lost share in China, dropping to 17% in the third quarter, from about 19% in the second quarter.”₇

In summary I believe that Google’s response to China had little to do with their moral stance which has apparently changed significantly since 2006 when they entered the market and which the company seem to forgo in order to continue to operate in democratic countries and more to do with an excellent public relations strategy which took the focus from the company and raised a contentious issue before a public with growing anti-Chinese sentiment.

Related articles

• Schmidt Hopes ‘Some Pressure’ Will Make China See Things Google’s Way (wired.com)
• Google Vs. China: A Bluffing War Begins (slog.thestranger.com)

References

[1] Schrage, E. (2006, 2 15). Testimony: The Internet in China. Retrieved 2 2, 2009, from The Official Google Blog: googleblog.blogspot.com

[2] Drummond, D. (2010, 1 12). A new approach to China. Retrieved 2 2, 2010, from Official Google Blog: http://googleblog.blogspot.com/2010/01/new-approach-to-china.html

[3] Hornby, C. B. (2010, 1 14). China defends censorship after Google threat. Retrieved 2 2, 2010, from Reuters.com: http://www.reuters.com/article/idUSTRE60C1TR20100114

[4] Fraher, J. (2010, 1 29). Google’s Schmidt Hopes ‘Pressure’ Will Help Chinese People. Retrieved 2 2, 2010, from Bloomberg.com: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6.eNsTFNWSc

[5] Shiels, M. (2010, 1 14). Security experts say Google cyber-attack was routine. Retrieved 2 2, 2010, from BBC News: http://news.bbc.co.uk/2/hi/8458150.stm

[6] Schneier, B. (2010, 1 23). U.S. enables Chinese hacking of Google. Retrieved 2 2, 2010, from CNN.com: http://edition.cnn.com/2010/OPINION/01/23/schneier.google.hacking/

[7] Mehta, S. N. (2009, 12 28). Google v. Baidu: Which company will win China? Retrieved 2 2, 2010, from CNNMoney.com: http://brainstormtech.blogs.fortune.cnn.com/2009/12/28/google-v-baidu-which-company-will-win-china/

I would like to start with my apologies for not writing to this blog for the past month or so. I have been busy with exams and the last few weeks of university fun. As I write I am sat in a bar in Spain piggybacking off the free Wi-Fi and sipping San Miguel.

I am posting a rare personal message today. In the past I have used this blog merely as an outlet for my musings on the financial, business and online world however I have big news which may affect my future perspective and so I thought it relevant. I would like to start writing more personal entries anyway and so I am breaking the ground so-to-speak with this.

My biggest news is that I have been accepted to spend a year at City University in Hong Kong for which I applied several months ago. I embark on the 20th of August and plan to continue with my management course which I started at Lancaster. I applied to study in the Far East because of the paradigm shift we have seen over the past few decades which has seen China, once a country which chose to isolate itself from the world seek the industrialisation similar to what we in Britain experienced in the 1800’s. 1.2 billion people now seek the same level of wealth and status as we in the west have enjoyed for centuries. In 1950 the average Chinese person earned $454 per capita (calculated at 1985 values) at sharp contrast to Western Europeans who were earning $4,902. Since the cultural revolution and Mao’s death however China has been on an unprecedented mission to catch up and has hurtled forward at breakneck speed causing many economists to predict that by 2040 China will surpass the US as the world’s largest economy. Experiencing business in an economy growing so quickly (even in the current climate) will undoubtedly be an invaluable experience.

The more historically or globally aware amongst you may observe that Hong Kong is in fact not a Chinese state. After the British surrendered the colony as recently as 1997 it became a ‘special administration district’ of China and as a result holds a unique position as an anchor between east and west making Hong Kong  - I hope - an ideal place to study Chinese culture without being uncomfortably detached from my own. English is also the second most spoken language (behind Chinese Mandarin).

I plan to continue with all my current obligations (such as the podcast – despite the time difference) and write more on this website perhaps about Hong Kong itself as well as my web-related interests and business observations.

In the old world businesses would make it as difficult as humanly possible for consumers to move from their service to a competitors. This makes economic sense, after all… people are less likely to want to move if it involves effort, if they don’t get the equivalent service elsewhere or if something (such as a blog entry) is lost. So why, in the last few years have we seen a sudden move towards ‘openness’ and transparency. Everything from social networks such as Facebook and MySpace to new blogging platforms such as ‘SquareSpace’ now preach that the users own their data… not the companies.

The answer is simple, it’s what the customer demands. Free and easy movement of information is a fundamental principle of the web and we are now in a position both technically and socially where we as consumers can demand this from our applications. However if indeed sites suddenly become democratised we appear to start on a slippery slope. Where does consumer input stop and the needs of the business start?

Facebook recently asked its users to help rewrite their ‘terms of service‘ after a controversy that hit the web hard. The legal agreement proclaimed:

Although the founder of Facebook responded to the event and said it was simply to cover the company legally, users were quite rightly outraged and Facebook was forced to change the agreement.

This flip-flopping not only demonstrates how passionate users feel about the sites they use but the power they wield over website owners. This therefore leads me to ask at what point sites can act autonomously and wonder whether this continued democratisation spawned by the wiki way back in 2001 will result in a much more open web and a changing model of business for companies now entering the internet arena.

One thing Facebook has learnt in the last few days is the importance of incremental updates rather than one large revolution in design. In a recent survey 94% of Facebook users said they disliked the new site design and Facebook for the first time ever announced that they were listening to users and are going to change the site based on feedback. So what can we learn from this experience?

Most people don’t like change. Generally change is confusing, it’s scary and makes users feel stupid when they can’t find the things they’re used to. Small changes people can cope with. Users won’t like them but if everything else looks the same they can quickly figure out what they want to do.

Warning that changes are coming is a good step for getting your users prepared as well, providing a preview or telling people what will change reduces alarm and thus keeps people happy. Although Facebook probably wont have lost any users from its recent changes it loses goodwill and this is something difficult to regain.

Affluence.org has been proclaimed ‘Facebook for rich people’. Every niche demographic seem to have their own social network and Affluence.org has been designed for rich people who like to talk to rich people… exclusively. It aims to bring ‘the members-only country club‘ mentality to the web but whilst this may sound like a good business model (think how much you could charge for ads that exclusively target rich people) I struggle to understand what these so called ’socially elite’ gain in return. Not making $300,000 a year or having a net worth exceeding $3 million I am (unfortunately) unable to join the site, and so this is a rather unbalanced review however I am interested in what we can learn from the business model.

Scarcity has always been a valued commodity and Affluence.org sells exclusivity.  No social network works if you’re on your own and the site is reportedly gaining about 400 to 500 new members each day. Although this is nothing  in comparison to Facebook’s 700,000 new users each day (as of Dec 2008) it is a fair rate of growth for such a site. From an advertisers point of view every member of Affluence.org  is worth far more than an ordinary user whose average salary (in the US) is $21,350 each year (a minimum of 14 times more in fact).

The site promises free access to a dedicated concierge, ‘invites to the most exclusive events and parties in the world’ and ‘priority access to the world’s most exclusive nightclubs, hotels, and restaurants’ as well as the usual social networking features. However many of these individuals will already have access to many of the above services.

The site really plays on a persons vanity. Everyone likes to feel like they belong to an exclusive club and this is what Affluence provides.This sort of scarcity creates the real value in a site and was something Google utilised in the growth of its GMail service, every member had to be invited and each of those members had 5 (and only 5) invites to pass on. Recipients of invites felt honoured and understood the scarcity which created a demand. The last thing the world needed was another webmail service but Google Mail utilised the value of scarcity to gain huge growth - and we can see this process being emulated by Affluence.org.

Remember FriendsReunited? Back in 2000 the UK spin-off of ‘Classmates.com’  in many ways laid the foundation of today’s biggest sites. It had a business model, a growth rate to rival that of Twitter and even made a profit of £22 million in 2007 - something Facebook and MySpace are still struggling to do.  So what went wrong and what can be learnt from failures of the past?

Cast your mind back to the year 2000. The millennium bug roams the streets, the Internet was at a lightning fast 56k per second for most and we all enjoyed the modem dial sound before being redirected to the Lycos homepage. The Internet was a void filled with Geocities websites, javascript hit counters and Google before it started selling adverts. Images took an average of 2 seconds to load and a full site could take more than 25 seconds.

Users saw the Internet as a peripheral… not as a utility as it is viewed nowadays. FriendsReunited captured the imagination and turned the Internet into something useful. Never before had there been a directory where users could connect and find people they had virtually forgotten about. The genius that built FriendsReunited was sucking people in. Someone once said the art of good business is being a good middle man and boy was this site a good middle man. You could create a profile and search for free… but talking to the guy who used to sit next to you 10 years ago is going to cost you. And people paid (remember back in the day when people paid for the goods and services they received).  They paid in their masses and in December 2005, Friends Reunited had over fifteen million members (which is equivalent to approximatelya quarter of the population of the UK).

So what changed? Firstly competitors arrived on the scene. By 2005 MySpace emerged as the biggest social network of them all, with a staggering  48 million users. With MySpace, users could join for free, they could customise their profile and add music and videos to portray their personality. What is more, it brought social networking to everyone. FriendsReunited was fine for finding your classmates years later, but what if you were still in school, or just wanted to find out what your friends were doing without emailing them? The site fell behind with outdated technology and an unfeasible business model. People could now find their classmates on other social sites and they could do it without paying £5 a year for the luxury. One thing the growth of Facebook has proven is that if you want to make it big… start with the young market. Facebook brought ‘Apps’ to the equation, users could create groups and see what their friends were up to as soon as they wrote it, without the need to email and ask.

ITV, the British broadcaster paid £120m for the site in December 2005. In February this year the value was estimated at just £20 million. A sad demise for a company that just couldn’t keep up.

Related Articles

• Friends Reunited valued at fraction of £175m paid by ITV (telegraph.co.uk)

One conclusion can be drawn from the current economic crisis… no one has a clue what to do. From Keynesian ‘Fiscal Stimulation’ (Plowing money into the economy to sustain jobs and ride the way through the recession until things pick up again. The famous quote is ‘putting money in bottles and burying them underground’ to create jobs for the unemployed) to printing money, there are so many so-called solutions to the current global economic downturn that even seasoned economists are struggling to keep on top of it all.

The problem seems to lie in the fact that our economy is now so global that there is no way to factor in every exogenous variable. And economists know this. President Harry S. Truman once said ‘For pity’s sake, will someone find me a one handed economist!’ and this pretty much sums up the current problem;  No one man can come up with any model to factor in every circumstance and outcome of any one action. Economists can only make recommendations based on what they have examined in the past. Unfortunately this situation is unprecedented… in short we’re flying blind!

Although many parallels can be drawn between the current recession and the great ‘Wall Street Crash’ and the ensuing depression (such as widespread bank failures which make it harder to obtain finance for investment) this time is completely different. In the 1920’s politicians raised taxes and cut spending in order to attempt to combat the fall in GDP. In the post-Keynesian era governments are doing as much as possible to spend money. In the march 2008 the British fiscal deficit was estimated to be £43 billion which works out as 3% of the total GDP. In January this year (2009) net debt was £703.4 billion, equivalent to 47.8 per cent of gross domestic product. This sort of public spending in order to combat the downturn in private investment has never been seen before on this scale.

Although personally I agree with the economic stimulus my point is this. Even the brightest economic minds in the world cannot possibly estimate the full impact (or lack of) that this excessive spending will have on the economy as a whole. And if  the old adage still applies ‘A little knowledge is a dangerous thing’ then it has never been more important to look at both sides of the argument and take an even handed approach when pushing forward into the unknown.

About 12 months back I was signed up to a great little tool called DocSycner which found all the word/excel/powerpoint documents on your PC and simply uploaded them to Google Docs. It was quick and easy and I found it incredibly useful as it allowed me to forget about carrying a memory stick from home to work and not concern myself with expensive off-site backup solutions (for the really important stuff such as work anyway).

When I got my new laptop I didn’t bother installing it (as it was the holidays and I had no need for it) but now i’m at university I can really see a use for it. Unfortunatly the company went bust in June 2008. Since then I have been hunting around for a solution. Sure there are plenty of great backup solutions such as Mozy or Jungle Disk but none of them compare to the simplicity of Docsyncer.

It’s sad that there was no way to monetise this technology (i guess they simply couldn’t compete with more advanced solutions) and presumably their business plan was ‘Year 2… be bought by Google’ but this is a loss to the search giant too. I used Google Docs more than ever when my files  were simply ‘there’… it became a replacement for MS Office which is the ultimate intention of the Google Docs Suite. So come on Google… pull your finger out and whip up a solution… my docs wont upload themselves!

Related articles

• Do You Use Google Docs? (geeksugar.com)

When mainstream media begin using twitter as a live feedback mechanism and the general public understand what is going on there is no doubt that we can say Twitter has hit the big time. Today whilst watching ‘The Wright Stuff’, a popular morning discussion programme in the UK the stand-in host (Richard Bacon) told the public to twitter in their responses.

Throughout the show he then read out tweets from his iPhone, intertwined with the usual text’s sent in as well as input from phone calls and the panel.

Although Richard Bacon has been promoting Twitter for a while now it’s part of a large movement in mainstream press to embrace Twitter which, up until fairly recently has been dominated by the US tech industry.

Celebrities such as Stephen Fry, Jonathon Ross and Chris Moyles have been using and abusing the service for weeks and now they are spreading the word. Indeed Stephen Fry now ranks third in the world, just below Barack Obama and CNN accoring to follower tracking site http://twitterholic.com/.

When Twitter is being used in the popular media (indeed the programme has a reputation for being watched by middle aged housewives) as a feedback technique (as sms messaging is) it is no longer a niche tech startup… it is now most definately mainstream.

Related Articles

• Huge UK Twitter increase and UK celebrities now in top 100 most followed Twitter users (nickburcher.com)
• Twitter Becoming A News Breaker (Alistair Charlton)
• Twitter on BBC’s The One Show (YouTube)
• Jonathan Ross introduces Twitter to over 4m Brits on TV (YouTube)
• Twitter on BBC Breakfast News (YouTube)

Following on from last week’s theme (but hopefully a little less negative and more constructive). This week is TIOTI.com (tape it off the Internet). The company is a UK based startup and tries to be a more comprehensive wikipedia for TV shows, but with a social networking layer. It started out life with a good grounding and featured on TechCrunch in October 2006 but seems to have failed to find its niche and sadly quickly stagnated before being bought in December 2008 by Vizimo.

Problems

1. Design - although innovative and fairly modern at the time, the site has suffered from the release of more and more features which has been badly integrated.
2. It tries to be all things to all men - The original idea was ‘last.fm‘ for television however the site seems to not know its aim. It feels like it doesn’t know what it wants to achieve. Indeed, on many pages it looks like the only desire is to sell DVD’s through Amazon’s affiliate scheme.
3. No community - the few discussions which are started on the pages for each show never really seem to take off. The pages seem to require a lot from users, asking them to write reviews and provide sources… to which most people’s response seems to be ‘why’?!

Good Things

1. The site doesn’t seem to suffer from lack of features. There is plenty going on and plenty to do.
2. The full catalogue of shows works well and seems to be auto-generated.
3. The site integrates with Netflix (US only) allowing you to add your favourite shows to your Netflix queue when they become available.

Advice

1. Identify the target market. What does this site want to be? Does it want to provide a catchup service, offer an alternative to piracy or encourage communities around shows and allow people to talk about it as they watch it? Either way it needs to taylor the site to this audience. Geotagging could allow the site to filter traffic too… meaning it could provide more useful and relevant information to its users (like when the shows air and when they are next on etc. )
2. Integrate current sites and current API’s. Probably the best resource for this sort of media is the IMDB.com, so utilise the data and pull it in. Set up ‘hash tagging’ on Twitter for each show, meaning people can remark on the show away from the computer and allow further commenting on people’s observations. Pull in data on how well the show is doing in the ratings. How many people watched the show, and what the broadcaster expects from that slot which will make users feel a sense of loyalty to the show as people feel obliged to ‘tell their friends’ to encourage channels to keep airing episodes.
3. Foster a community by implementing an incentive points system. Users respond to ‘credability’… more useful things gain more points (e.g. adding a source) etc. This will also engage people in a sense of competition and encourage them to post and check back on the site regularly.

Related Articles

• Social TV site Tioti sells to Vizimo; will be technology ’shop window’ (guardian.co.uk)