GOOG Alphabet Inc

By Christopher Mims 

Everybody's got to grow up sometime. For Alphabet Inc.'s Google, that transition from youthful idealism to crusty, middle-age realism is in full swing.

The latest evidence of Google's pragmatic side is its Dragonfly project, a version of its search engine that would conform to China's strict censorship, so that Google can bring search back to that country after abandoning it in 2010. But this is hardly the first example of Google's "Don't be evil" approach morphing into something more like "Get real." (Even that famous motto has been downgraded in the company's latest code of conduct.)

In the past year, Google's leadership had to rapidly backpedal from the company's attempt to work with the Department of Defense on projects to enhance weapons targeting -- and the decision to back out met with criticism as well. The company also recently found itself defending its practice of tracking users who have switched off "location services," as well as its apparent lack of policing of developers who are granted access to users' Gmail accounts.

In addition to provoking the public and lawmakers, these business practices have inspired pushback from the company's own employees -- leading to a nonstop and often rancorous debate -- and threatened Google's ability to recruit top talent.

Google's critics, external and internal, warn that diverging from its idealistic mission could lead to more-unethical use of its powerful technology. If the company doesn't manage its priorities right, both its customers' and employees' willingness to trust it could erode, threatening its growth.

"When you start with an ethical, mission-driven company and take out the ethics, that's a problem," says Tiffany C. Li, an expert in technology law and a resident fellow at Yale Law School's Information Society Project.

"If Google builds a censored search engine in China, other countries can ask for this," says Ms. Li. A Google that is complicit with laws that don't align with those of its home country normalizes the abridgment of free speech everywhere it operates, she adds. (Google already removes links from its search engine in compliance with local laws -- for example, Germany's hate-speech rules.)

To understand why Google would choose to move away from its founding values, it helps to look at what its leaders might hope to get in exchange. Google is currently coping with flat growth in smartphone sales, more competition in digital advertising ( even from Amazon), growing regulation in Europe, including a record $5 billion fine, fresh calls for regulation in the U.S. at the federal level and the passage of a comprehensive California privacy act. It also faces possible new regulation and protectionist laws in India, and the rise of tech companies in China that can compete globally.

So far, none of these headwinds have managed to slow growth in Google's revenue. Google's leaders are thinking about the future, however, and since Google is still overwhelmingly reliant on advertising, they surely know that eventually they will saturate even that substantial market.

China is a notoriously difficult place for Western firms to get a toehold. Yet there is definitely a market in China for even a censored Google search engine, says Rui Ma, a Chinese-American angel investor who splits her time between Beijing and Silicon Valley.

China's dominan search giant, Baidu, is widely believed to be advertiser-friendly to the point that it promotes spam and misinformation, says Ms. Ma. In 2016, Chinese regulators began to crack down on Baidu for its inclusion of misleading information. Spam and promoted results are "the bulk of the complaints about Baidu from Chinese people," she says. "It's not about censored results."

Baidu has told the Journal in the past that it believes its competitors could be behind criticism of the company.

Google's stated mission is to "organize the world's information and make it universally accessible and useful." For whom, exactly, would Google be "organizing the world's information" if it allows the Chinese government to dictate what is real.

And what will be the result of Google's potential collaboration on cloud services with Tencent? The two companies have been talking for over a year about a scenario in which Google would obey China's data-residency laws and keep users' data in the country. This could mean exposing it not just to China's censors but making its technology directly accessible to the Chinese government.

This isn't just about Google and China. In fact, many other businesses -- Apple Inc. included -- have found ways of working within China without creating a backlash among customers and employees alike. All companies are driven by profits, even "mission-driven" ones. But by initially laying out the "Don't be evil" mission, Google held itself to a higher standard. Any apparent departure from that runs the risk of damaging its brand.

There is an irony in Google's attempt to strengthen its business by bending toward realpolitik. Many of the brightest people in tech come to Google not just for the catered meals and ample pay, but because they are stirred by its idealistic mission. Those people might be equally motivated by the company's abandonment of it -- to leave.

One Stanford study on the politics of leaders in Silicon Valley found them strongly liberal, but at odds with Democrats on labor rights and government regulation. West Coast tech workers have begun organizing to oppose their own employers on matters like treatment of contract workers. If Google continues down the path it's on, it seems destined to alienate both existing employees and potential new hires.

In an industry where the biggest companies get bigger by investing in themselves and their own technology, Google's attempt to "grow up" means it's playing a dangerous game, not just with global democracy but also, potentially, its own bottom line.

Write to Christopher Mims at christopher.mims@wsj.com

(END) Dow Jones Newswires

August 16, 2018 09:59 ET (13:59 GMT)

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