Is a boycott of Yahoo! and Google realistic?

29 March 2006

Yahoo! the internet search engine, advertising medium, and e-mail supplier, helped the Chinese police to trace human rights-related e-mails, which has resulted in prosecution and a ten-year sentence for the journalist involved, Shi Tao. Yahoo!''s rival, Google, has agreed with China that in return for access, its Chinese site will block content that the Chinese government does not approve, for example those relating to human rights campaigns.

Some groups are now advocating that users should boycott the two companies for ethical reasons. But Mike Davis, Research Analyst with Butler Group, Europe''s leading independent IT Research and Advisory organisation, asks ''is that realistic?`

The Chinese created a phrase when they took back Hong Kong from the British, to allow for the fact the former colony would have levels of freedom not allowed in the rest of China, "One country — two systems." My belief is that the IT industry is using a variant, "One world — two standards."

From a business point of view no company can ignore the world''s fastest-growing economy, and the opportunities presented by a country, which is producing more graduates each year than the whole of Western Europe. Players such as IBM, CA, and Sybase have been running low profile but influential operations in China for a number of years.

Oracle has a joint venture with a Japanese company in Southern China, and Microsoft (partly in an effort to get traction with the Chinese government) has established the fifth of its Research centres in Beijing.

In this context it is hardly surprising that ''new'' entrants such as Yahoo! and now Google will ''compromise'' the standards they apply elsewhere. Yes image is important, but this needs to be put in the context of the potential revenues to be achieved by being in the market — or more importantly, the opportunity cost of revenues being lost by others, with a less ethical stance, taking market share.

For many years there has been an international campaign against the Swiss food giant Nestlé because of its policy of advertising formula baby milk in Third World countries where incomes do not allow people to buy sufficient quantities, and there is no clean water supply.

Despite the campaign, Nestlé continues to grow, and in many places is now the de facto monopoly supplier for confectionary and bottled water, through associations with companies such as McDonalds and Disney.

We have seen many campaigns, from personal to government level, against Microsoft''s dominance of the desktop, but they have also arguably had negligible effect on either market dominance or share values.

Reputation is undoubtedly important; the Anglo-Dutch oil giant, Shell saw its shares drop 11 per cent when it was revealed that the company had inflated oil reserves by a third. However within a year it reported the biggest profit in its history. Google and Yahoo! as brands are too big to be ignored by consumers and businesses, and China is too big for those companies to ignore for potential future revenues.

Being more charitable to Google in particular, despite the fact it has applied filters for China, it is making much more information accessible within the country. Users are aware that not all content is being displayed, and history tells us that as people become more educated and informed, society changes.