The search engine industry operates across territorial boundaries as the gateway to the newly established marketplace of the Internet that has been absorbed into the global political economy, enabling the selling of new goods and services and reorganizing the way everyday people live and work. Search has been organized as a social, political, and economic control structure that plays a major role in deepening information markets on a global scale. This fundamental function of search is dominated not by Great Britain, Germany, France, or China but by the US-based search engine industry—primarily Google. American dominance seemingly reaffirms a long-established US-led global information and communication order; however, it has pried open new geopolitical flash points among key global power centers.
Google dominates most of the world with a few exceptions—Russia, South Korea, and China. There are two particularly contentious zones, one with a burgeoning Internet sector and one almost completely bereft of a domestic Internet sector: China, a relatively new and expansionary economic force and the world's second-biggest economy, and the European Union, a longtime US ally as well as its economic competitor and historical political counterweight. In China, where Google has struggled to carve out a foothold in the largest market in the world, the Chinese search engine Baidu dominates. Meanwhile, Europe's dependence on US information systems has benefited the United States; thus, Google's dominance as well as China's emerging tech sector have provoked Europe's anxiety over losing control of strategic emerging Internet sectors to both the United States and China. Given the rivalry between the two nations, the European Union has been asserting its power via the pursuit of a series of regulatory impositions and antitrust cases against Google and other US tech companies and has called for technological sovereignty. Given that these three entities are the largest global economic and trading partners, the clash between power blocs has significant impact on shaping the global Internet. What is the nature of these conflicts? Where is the tension and resistance? This chapter explores both questions.
Information and communication technologies have long been vital for capital's geographical expansion. As Dan Schiller points out, they have been built, rebuilt, and extended over the course of centuries to facilitate the global capitalist system and its expansion by serving cultural and information commodities and services as well as supporting capital flows and global supply chains.1 Historians have shed light on the link between ICTs and capitalist empires, revealing that the process of construction of global networks has been interlinked with the interests of nation-states, national and transnational corporations, and other political constituents.2 Dwayne Winseck and Robert Pike point out that global network building has involved not only major imperial power states but also collaboration among states, multinational conglomerates, and international organizations.3 Thus, they describe this system as a “shared hegemony,” though Great Britain was the dominant imperial power in the nineteenth and early twentieth centuries. Ellen Wood's conceptualization of capitalist imperialism is instructive in clarifying this idea. She states, “Today's imperialism is not really about the relation between a capitalist and a non-capitalist world. It has more to do with the relations within a global capitalist system.”4 In other words, capitalism is a system in which the economies of capitalist nation-states are interconnected and unevenly integrated into a global economic system.5 Thus, the wiring of this global network infrastructure is complex, requiring cooperation from multiple states, different units of capital, and political and social actors while it also meets a range of resistance and obstacles. Since World War II, the United States as capitalist imperial power has been the leading player in constructing global information systems in the sense that it has forged relationships with its subordinate countries by means of both coercion and alliance. This long-standing structure has built the Internet systems; however, the new geopolitics and economics are challenging the existing order. This chapter illustrates the role of geopolitics in the restructuring of the global political economy of the Internet, at the center of which is search.
First, the chapter discusses the historical context in which the United States has ascended and presided over global network infrastructure for decades, while illustrating the instabilities of the US position. The second part demonstrates the current political economic context, in which China has become entrenched in global capitalist markets and has strategically built its domestic Internet market by both drawing in and limiting foreign capital. The Chinese Internet sector has been persistently viewed as state-controlled cyberspace, the “Great Firewall,” but the chapter challenges the Western mainstream framework of democracy versus authoritarianism. Taking a critical approach, the chapter illuminates the fact that the growing domestic Internet market in China is inextricably integrated with US-led transnationalizing digital capitalism. Finally, the chapter examines the European Union's uneasiness toward both US and Chinese tech power, its failed attempts to build an alternative to Google, and its renewed efforts to build an EU-based Internet sector and weaponize regulation to shape the global Internet sector.
Within a few hours of Great Britain's declaring war against German imperial ambitions in 1914, it destroyed two German submarine cables that connected Europe and America and began to censor all communications that went through British-controlled cables in order to isolate Germany. This alarmed the United States owing to the lack of sufficient independent communication infrastructure and spurred the country to build its own independent information networks in order to serve their economic interests and promote geographic expansion.6 The United States attempted several times to build its own communication networks in the interwar years but did not realize these plans until World War II and afterward.
Relatively unscathed by World War I, the United States was in an improved position in its rivalry with the other world powers, as Germany was defeated and Great Britain and France were weakened by the war. After World War II, the United States emerged as the sole capitalist imperial hegemon in the global capitalist system, moved away from its reliance on Great Britain's colonial information system, and began to build its own information infrastructure.7 The expansion of the information industry played a central role in the country's ascent into a position that today dominates the world via the economic instruments of capitalism. This power has not gone unnoticed by its rivals, however, and its formidable position in the information sphere has been repeatedly assailed over the course of time as geopolitics and economics have changed and interchanged.
In the 1970s the government of President Valéry Giscard d'Estaing of France was troubled by US corporate dominance in computer and information technologies and France's cultural and technical dependence on the United States. The response to US dominance in the computer industry was articulated in the 1978 report Computerization of Society, also known as the Nora and Minc Report.8 The document, commissioned by the French government, warned of American domination in “telematics” as a threat to French sovereignty and economic competitiveness and warned of IBM's dominance in the European information market. The report urgently called for government intervention to counter IBM. It also recommended that the country develop its own information-based industry as well as a comprehensive national strategic policy and investment in national information technology and telecommunication systems.
Also in the 1970s, from a different direction, the Non-Aligned Movement, led by newly independent countries of the global South aspiring to self-determination and galvanized by a mass movement, challenged the United States and the Western information sphere as they recognized the importance of control over information for their economies, cultural independence, and national sovereignty. They demanded a new world information and communication order (NWICO). Mobilized by the Non-Aligned Movement, NWICO, using the venue of UNESCO, called out the structural power imbalance of global information flows and sought out a more equitable, balanced information exchange among sovereign nations.9 The United States, which had deployed the Free Flow of Information doctrine to support its global expansion, was criticized, and it attacked NWICO.10
The Free Flow of Information doctrine, part of the capitalist imperial strategy designed by the US government and corporations, was an economic means to coerce nations of the global south to open their ICT markets. This confrontation between the United States and its Western allies, on one hand, and the global South, on the other, led the United States and the United Kingdom to leave UNESCO in 1984 and 1985, respectively.11 By the late 1980s the NWICO movement had been defeated by intense pressure from the United States and its allies, which further opened markets in newly decolonized countries.
Thirty years later, in the early twenty-first century, the debates about the unequal global power structure of the new ICT system resurfaced, starting with the World Summit on the Information Society, hosted in Tunis by the International Telecommunication Union. This time the debate concerned the Internet. The Tunis Agenda stated that “all governments have an equal role and responsibilities” with regard to the development of the Internet and policy concerning its use.12 The summit offered a venue for developing countries to challenge US control and to debate the global disparity in access to information and communication technologies; however, it fell far from achieving its goals.13 The United States refused to cede control of the Internet Corporation of Assigned Names and Numbers (ICANN), the organization that oversaw the Internet's naming and numbering systems, which at the time was under the control of the US Department of Commerce. The United States agreed to create a new organizational actor, the UN-affiliated Internet Governance Forum, though it would be within the existing ICANN structure. Schiller observes that this was done so that the United States could push back against more drastic reforms that could lessen its control over the Internet.14 In 2013, however, Edward Snowden's revelations about the mass surveillance program being run by the United States refueled the debates regarding its role in ICANN and its outsized influence over shaping the Internet. The United States faced immense international pressure to relinquish ICANN. The Department of Commerce finally did so, with the caveat that a multi-stakeholder model would be best. The United States made this compromise to avoid turning ICANN over to the International Telecommunication Union, which was the intergovernmental approach for which China, Russia, and a coalition of African and Middle eastern countries had advocated.15
The battle over the information and communication sphere is far from over. And today's contention needs to be approached within this historical context, though the actors and their motives may have shifted. The business of search is one such new information domain.
The United States has long recognized the importance of its primacy over information in the maintenance and extension of US-led global capitalism. President Obama, addressing American innovation in his 2011 State of the Union address, claimed: “What America does better than anyone else is spark the creativity and imagination of our people. We're the nation that put cars in driveways and computers in offices. The nation of Edison and the Wright brothers; of Google and Facebook.”16
The search engine industry, one of the top new US strategic information industries, has cultivated an entirely new global industry. Led by Google, US tech firms dominate in the sphere of information search, controlling the entry point of the Internet, as they expand the domestic information market, churn out many new products, and aggressively build an extraterritorial information network for the global market. This process of global penetration requires collaboration among nation-states in order to remove barriers to entry, and it faces opposition. Thus, Google's global dominance is not a permanent condition; rather, its continued growth and expansion actually depend heavily on geopolitical and economic forces and the politically organized global markets. In particular, Google has long been struggling to move into China. The firm's inability to do so has often been viewed by the liberal Western media as a struggle between democracy and an authoritarian regime, but the story is far more complex. The following section demonstrates that the development of the Chinese Internet sector is structurally integrated within the existing system of the US-led information order, which relies heavily on transnational capital, and at the same time the Chinese state has been maneuvering around the US-dominated information order and has built a domestic Internet sector that is tightly interlinked with the global economy.
The information industry has long been considered to be of strategic importance for China within the wider context of its reintegration into the global capitalist economy.17 In the 1970s the post-Mao Chinese Communist Party, just emerging from its Cultural Revolution, launched a national campaign in four areas of “modernization,” with science and technology being one of the sectors along with agriculture, industry, and national defense. In shifting from Maoist socialism to a more state capital–oriented economy, China had prioritized its IT sectors as driving forces, designated its information industries as one of the pillars of the national economy, and reorganized these sectors into a new zone of economic growth.18 The former Chinese president Jiang Zemin once stated, “None of the four modernizations would be possible without information.”19 It is therefore important to consider the development of China's ICTs to set the stage for the geopolitics of search in that region.
Starting in the late 1980s, as part of its overall economic reform, China carried out extensive industrial reform policies to develop its domestic information and communication sectors, including the building of national networks, special economic zones, and state-funded technology parks, supporting homegrown software and hardware IT firms, and investing in large-scale state-sponsored ICT infrastructure initiatives.20 Along with its national push to build information infrastructure, the state made a concerted effort to bolster the commercial use of information technologies at every level of industry, government, and people's everyday lives through a series of state-led informationizing initiatives. These included the Golden Bridge Project, a national public information network called the Golden Gateway, a foreign trade and import and export network, and Golden Card, the national credit card network.21 Information technologies were adopted across a wide range of sectors, and by the late 1990s the commercial Internet domain made up 76 percent of all domain-name registrations.22 China announced that 1999 would be “The Year of Getting to the Internet” and soon became the largest IT market in Asia. The Chinese state thus played a central role in the country's reintegration into the global capitalist economic orbit.
While China's accession into the World Trade Organization in 2001 was seen as officially opening up China to foreign capital, as Yu Hong shows, long before that, the Chinese government had facilitated foreign investment and technology transfer in the development of its tech sector via a policy friendly to foreign direct investment and by selectively reducing state investment.23 In 1994 foreign investment in the Chinese telecommunications sector was already 16.8 percent of total foreign investment.24 And by early in the twenty-first century such major multinational corporations as IBM, Microsoft, Intel, Alcatel, General Electric, Bell Labs, and General Motors had already established R&D centers in China. As Yuezhi Zhao succinctly put it, China's restructuring of its ICT sectors was a key means for it to open itself to the global capitalist system.25
As part of opening up, China's economic policy explicitly encouraged the participation of Chinese private and foreign capital in the development of its Internet service sectors.26 Lutao Ning points out, however, that China had two clear strategies for the prized ICT sector: “Attracting in” allowed domestic firms to access large amounts of capital and technical knowhow, while “walking out” facilitated the boost in global competitiveness and integration into the global market. “Attracting in” was a crucial first step toward “walking out.”27
Yet China's “attracting in” policy didn't mean outright liberalization. Min Tang documents the state's process of implementing carefully crafted multi-tiered regulations concerning ICTs throughout a different economic developmental stage.28 The ICT sector was protected as a strategic industry, restricting foreign direct investment and causing a majority of such funding to be poured into the ICT manufacturing sector.29 Meanwhile, the Chinese state had begun to boost domestic tech startups and create the conditions for drawing foreign capital into its nascent tech sectors.
From the 1980s to the 1990s, China launched a series of initiatives to develop its domestic technology base by funding tech-start-ups and offering incentives to foreign capital firms to invest in and locate in China. This involved a high-tech program called 863 that funded R&D at universities in critical areas. The Ministry of Science and Technology kicked off the Torch program to create and support high-tech industrial zones including “incubators” for high tech start-ups30 and made technology transfer regulations for joint ventures with foreign firms. Many of the projects from 863, the Torch program, and tech industrial zones were spun off as the government functioned as venture capital (VC). By the mid-1990s China recognized that these funding systems were insufficient to develop tech start-ups into a national economic development project, so the state further liberalized the market, establishing both government-financed and university-backed VC firms.31 In 1998 corporate-backed VC firms were allowed to be established; the following year, the state introduced the regulatory framework for VC investment. This brought VC firms backed by the government, as well as corporate and foreign capital, into the market. Foreign VC firms had been allowed to operate since the 1980s with limited capacity, but by the twenty-first century they had become a major source of financing for tech start-ups.32 Subsequently, the first dot-com boom brought significant foreign venture capital investment to Chinese tech start-ups as China's Internet sector and global financial capital converged. But direct VC was not the only mechanism for drawing foreign capital.
Domestic and foreign firms also pursued joint ventures and joint research and development of mutually beneficial interest that allowed foreign firms access to the Chinese market and gave Chinese firms access to foreign capital. American Internet firms such as Yahoo!, eBay, Amazon, and Microsoft entered the Chinese market via joint ventures with local companies. Foreign investment in value-added Internet services was restricted by the state, however, so Chinese Internet firms and foreign capital took a different route and began to rely on a system called variable interest entities (VIEs), a workaround in which foreign investment could be utilized to participate in restricted industries such as the Internet and telecommunication sectors but could not directly control the enterprises. The VIE structure is often referred to as the Sina model because it was first deployed in 2000 by the Chinese Internet company Sina. In the VIE structure, two entities are created: One is offshore and the other is in China. Chinese individuals and foreign investors first establish an offshore entity in the Cayman Islands or another tax haven into which they can inject capital; in turn, they can acquire ownership in offshore assets. The Chinese subsidiary sits between the offshore firms and the VIEs. Via a series of contractual agreements with the Chinese subsidiary, the VIEs enable the overseas-listed company to, in effect, run its operations inside China.
In addition to Sina, other major Chinese Internet companies such as Baidu, Tencent, Tudou, Sohu.com, Alibaba, and JD.com listed themselves on the stock markets in the United States, Hong Kong, and Shanghai using the VIE structure.33 By 2011 the law firm Cadwallader reported in the Financial Times that 42 percent of Chinese companies listed on the US stock exchanges were using the VIE structure, with thousands of unlisted companies operating in the same way.34 The Chinese government remains well aware that many of its Internet firms use VIEs to draw in foreign capital and that foreign capital uses VIEs to invest in the restricted Chinese Internet industry. For a couple of decades, however, China maintained its ambiguous policy stance without clamping down on Chinese companies using the VIE structure in their IPOs. What, then, was the reason for not taking direct action against VIEs to restrict foreign capital in Chinese strategic industries? And on the flip side, US shareholders in Chinese Internet firms face major risks because Chinese courts might not hold that those contractual agreements are legal, according to a report by the US-China Economic and Security Review Commission.35 Why, then, did US investors continue to invest in Chinese Internet firms in this manner for two decades?
For the Chinese government, this seemingly ambiguous position allowed for state influence at arm's length, effectively maneuvering between the interests of national and transnational capital and controlling the flow of foreign capital into strategic industries while also providing the party with space to regulate as needed. Meanwhile, the US government calling the VIE structure illegal was an attempt to nudge China at that time to further open its Internet market. At the same time, there was unspoken understanding among transnational capitalists that the Chinese state was unlikely to take any measures that would negatively affect major Internet firms because too many firms rely on VIEs, involving massive financial stakes across the sector. In early 2015 the Chinese Ministry of Commerce released a draft law revising its Foreign Investment Law to favor transnational capital by legalizing VIEs so that foreign investors would have ownership rights in Internet industries along with telecommunications and education industries.36 The draft law was never implemented, but the issue of VIEs resurfaced with escalating tensions between the United States and China. In 2021 the China Securities Regulatory Commission proposed new rules for overseas IPOs but did not ban the use of VIEs. Chinese companies that sought to list abroad via VIE could use them but would now be required to follow compliance procedures.37 The Chinese state signaled assurances of foreign capital's continued investment in China's Internet sectors, but at the same time, with this move, it legitimized its ability to intervene as needed.
The state has been instrumental in managing the flow of capital, establishing home-grown industries, and working in tandem with transnational capital to allow it to be deeply interwoven into the development of the Chinese Internet industry. Since the integration with global capitalism, the Chinese state has been navigating between private and public actors and between transnational and national interests while creating space for domestic industries within US-led digital capitalism—something that postwar western Europe has so far failed to achieve. Zhao underscores the state's active participation in absorbing foreign capital and its ability to negotiate with transnational capital on specific terms of entry.38 Within this context, Google's counterpart Baidu emerged.
Baidu was co-founded in 2000 by Robin Li and Eric Xu, Chinese nationals educated in the United States. In 1999 the two raised $1.2 million in seed money from the Silicon Valley VC firms Integrity Partners and Peninsula Capital and returned to China.39 On January 18, 2000, with that seed money and using the VIE structure, Baidu was incorporated in the Cayman Islands as Baidu.com. In 2005 Goldman Sachs, Piper Jaffray, and Credit Suisse First Boston underwrote Baidu's IPO and listed it on the NASDAQ stock exchange. Baidu's IPO was considered the biggest opening on NASDAQ since the dot-com peak of 2000. Soon afterward, Baidu secured another $10 million from two other US venture capital firms, Draper Fisher Jurvetson and IDG Technology Venture.40 The 2010 Report to Congress of the US-China Economic and Security Review Commission stated that Baidu's initial majority investors were Americans and American firms.41 Google, Baidu's competitor in China, even bought a 2.6 percent share of Baidu in 2005—and sold the shares for a 1,100 percent return as the company started its own operations in China. Baidu embraced Google's investment. Baidu CEO Robin Li stated, “Google is a leader in the global Internet industry and its investment will help investors appreciate the value of a search engine provider like Baidu.”42 In fact, in 2015 Google offered $1.6 billion to gain control over the Chinese search market, but ultimately Baidu rejected Google's takeover attempt.43 At the time Baidu was filing its IPO the majority of its shares were held by financial institutions and mutual funds including Baillie Gifford & Co., Price (T.Rowe) Associates, Inc., Oppenheimer Funds, Inc., and Capital Research Global Investors. Baillie Gifford, Price (T.Rowe) Associates, and others were also top shareholders of Google.
Baidu was far from an exception. Early Chinese Internet startups were nurtured by both the Chinese state and transnational capital, in particular US venture capital. One of Baidu's early accumulation strategies was aggressively building partnerships with domestic as well as foreign IT companies that wanted to break into the Chinese information market. In 2006 Baidu struck a deal with MTV to provide original television and music programs to Baidu and share advertising revenue, entered into a cooperative agreement with Nokia, and worked with Intel to develop search services. In 2010 the company teamed up with Providence Equity Partners, one of Hulu's investors, to inject $50 million into the creation of video platform iQiyi, and later acquired Providence Equity Partners’ stake in the platform. Now iQiyi is the largest streaming service in China.44 Baidu established a joint venture with Japan-based Rakuten to operate a business-to-consumer online shopping service in the Chinese market. In 2011 Baidu partnered with Dell to develop mobile phones with its own mobile operating system to target the Chinese market, which was then dominated by Apple and the Chinese company Lenovo—itself the buyer of IBM's PC business. While not all early strategic partnerships were successful, the series of partnerships, along with the drawing of foreign capital, facilitated Baidu's embedding itself deeply into the global tech sectors and expanding its Internet business.
The rise of Baidu in China has often been attributed by the Western media to Google's partial withdrawal from China in 2010 and Chinese government policies favoring Chinese-owned companies. After Google moved its operations to Hong Kong, Baidu was supposed to fully monopolize the Chinese search market with little competition. This prediction was only partly correct. By no means has the search engine market in China stabilized, although Baidu seemingly dominates it. Baidu was and is facing serious competition among other fast-growing homegrown Chinese Internet firms fueled by global capital, so its continuing dominance in search is far from assured in the rapidly changing Chinese information landscape.
China's search engine market quickly evolved and became crowded. One of Baidu's early major competitors was Qihoo, founded in 2006 by a former Yahoo! executive and initially backed by the VC firm Sequoia Capital,45 which was also a major backer of Google. In addition to Sequoia, Qihoo was supported by both Chinese and foreign VC firms such as IDG Ventures, Highland Capital Partners, Trustbridge Partners, and the Chinese private equity firm CDH. The company was known for being China's largest antivirus software vendor, but it launched a search engine called so.360.cn, then used it in place of Google as the search engine on its portal.
In the beginning Qihoo gradually chipped away at Baidu's search market share, and Baidu responded by blocking Qihoo from access to its products and services. Baidu also took legal action against Qihoo 360, claiming that the latter violated its robot exclusion protocol by indexing its web content without permission.46 In response to the lawsuit, Qihoo argued that Baidu's actions violated China's anti-monopoly laws.47 To ease the tension between these competitors, the Internet Society of China, a government-backed trade group, stepped in and in 2012 got search companies and other Internet firms including Baidu, Qihoo 360, Tencent, and Sina to agree to sign a self-regulation pact including a code of conduct to maintain fair competition.48 This self-regulation could be seen as weakening the role of the Chinese state in the new market-oriented economy, but it was part of the state's neoliberal strategy, whereby the party distances itself from the market yet is able to maintain its influence and strategically facilitate commercialization processes.
Trailing Qihoo was Sogou, a subsidiary of the web portal Sohu and a long-time player in the Chinese search market. Sohu was the first Chinese-language search engine and portal in China. The company was founded in 2004 by ChaoYang Zhang, who received his PhD in experimental physics from MIT in 1993. Zhang left his position as MIT's liaison officer for China and returned to China in order to start his own company, Internet Technologies China (which later changed its name to Sohu), with help from MIT Media Lab director Nicholas Negroponte—the evangelist for One Laptop per Child—and Edward Roberts of MIT's Sloan School of Management.49 Sogou held a solid 10 percent share of the search market—good enough for third place in the market—but it wasn't able to sustain growth. Thus, in 2013 Sogou made a deal with Tencent, which invested US$448 million for a 36.5 percent stake in the company. Tencent had originally partnered with Google, but in 2009 it had replaced Google services with its own Soso search platform; now Tencent merged Soso into Sogou.50 After that Sogou became a distant second behind Baidu in terms of market share. In 2021 Tencent completely acquired and absorbed Sogou into its WeChat platform with its more than 1.2 billion users—80 percent of China's total population—to directly challenge Baidu.
Meanwhile, in 2013 e-commerce giant Alibaba rolled out its general search engine, called Aliyun or Alibaba Cloud Search, the same brand as its mobile operating system. Aliyun's cloud computing division offered the basic features of search (Internet, news, images, and maps) and competed directly with Baidu.51 This was not the first time Alibaba had ventured into the search market. In 2010 it had partnered with Microsoft and launched the shopping search engine Etao.com;52 at the same time, Yahoo! owned 40 percent of Alibaba. And in 2014 in order to tackle China's growing mobile search market, Alibaba formed a joint venture called Shenma with the Chinese browser developer UCWeb, which in 2021 was the third most widely used mobile search engine. In 2019 ByteDance, backed by Kohlberg Kravis Roberts, SoftBank Group, Sequoia Capital, General Atlantic, and Hillhouse Capital Group (the owner of social media app TikTok), also jumped into the search market, launching Toutiao Search and scooping up engineers from Google, Bing, and Baidu.53
Given this political economic context, the growth of a competitive search market in China can't be seen only from the perspective of the insulated “Great Firewall” managed by the Chinese state, which censors search engines. This market evolved within the context of China's infusion of transnational capital through attracting in and walking out. Instead of seeing the sector only as part of the Chinese state's censored media, therefore, Chinese search engine companies should also be seen as what Lianrui Jia and Dwayne Winseck describe as “capitalist enterprises” that operate under an expansionist imperative and are highly integrated into the global capitalist market.54
As Chinese Internet firms have looked to diversify their accumulation strategies, they have, like US firms, moved into each other's territories of search, social media, browsers, mobile phones, music, games, video, e-commerce, the “Internet of things,” cloud computing, and autonomous cars, all predicated on continuing commodification and commercialization of the Internet. China's dynamic and fluid search market is increasingly fragmented as new players continue to enter it.
As the company faces intense competition on multiple fronts, Baidu's main revenue source, online ads via search, has been steadily declining. To survive and maintain its market primacy, Baidu needed to find a new growth sector, and so it pivoted its strategy toward AI because China is poised to lead the global AI market, which is expected to grow to $554.3 billion by 2024.55 Baidu's reorientation of its business to AI was also done to seize an opportunity in responding to China's new economic developmental phase. Facing intense economic pressure from the United States and its allies, China has accelerated the restructuring of its economic base to pursue self-reliance by moving up the value chain from low-end labor-intensive manufacturing industries to high-tech-driven industries and upgrading its industrial sectors by incorporating advanced information technologies such as AI, big data, cloud computing, and semiconductors. As part of the new economic initiative, the Chinese government selected AI as one of the strategic areas for emerging industries in its Thirteenth National Five-Year Plan (2016). The government released a policy document in 2017, the Next Generation Artificial Intelligence Development Plan, aiming for AI to be the driving force for China's industrial upgrading and economic restructuring to move up the value chain.56 In pursuing this goal, the state drew in major domestic tech companies to develop its domestic AI industry.
Baidu is considered one of the largest AI companies in the world. Its new slogan is “All in AI,” putting it into all its core products and services in order to gain a competitive advantage and racing to develop cloud services, mobile platforms, smart speakers, and autonomous cars. Baidu has filed for more AI patents than any other Chinese company, and has been granted 2,682 patents as of October 2020.57 The company has poured a great deal of capital into its autonomous vehicles, testing its Apollo self-driving platform in China and the United States, and it has shored up partnerships with Microsoft, Intel, BMW, Ford, Volvo, and Volkswagen. Baidu's autonomous car, brought to the road first in China, has driven more miles than any of its competitors.
Given the ever-intense domestic and global capitalist rivalries within China, along with rapid technological change, Baidu's dominant position in search and its future growth in the Internet sector continue to be challenged. Thus, Baidu is compelled to seek not only sectorial expansion to reduce its dependence on ads but also “walking out” toward a geographical expansion of its business; meanwhile, Google's efforts to cultivate the world's largest market continue unabated.
Baidu's transnational ambitions go back to 2007, when the company launched its search service in Japan. The company chose Japan because of its cultural similarities and the use of Chinese characters in the Japanese language. After eight years the service came to an end because Baidu wasn't able to make a dent in its competition against incumbents Yahoo! Japan and Google. Yet this experience has not deterred Baidu's global expansion effort. Baidu has since made a series of forays into emerging markets, targeting Southeast Asia, South America (Brazil), and the Arabic-speaking regions (particularly Egypt).58 It also eyed the European market, working with the tourism administrations of Denmark, Finland, Norway, and Sweden to target China's outbound tourism market, thus directly competing with Google Maps and Apple Maps. However, Baidu has been struggling to expand outside China, meeting with many losses, and it has shut down some of its international operations including in those Brazil. The company's business is still quite limited in China and faces barriers and constraints in operating within US-led digital capitalism.
Although Baidu has had to retract a large part of its global expansion efforts for the moment, for its survival and growth the company cannot afford to abandon the global market. Baidu continues to operate a couple of major R&D centers abroad. Its research lab, the Institute of Deep Learning, which opened in Silicon Valley in 2013, recruited Andrew Ng, a leading AI researcher who previously worked on deep learning at Google. The R&D center—located close to the offices of Apple, Motorola, Amazon, Google, and Microsoft—recruits top engineers, taps into US academic institutions, and develops AI.59 Its second Silicon Valley R&D center is the home of a division of Baidu's Intelligent Driving Group, which focuses on its Apollo platform. The company has already obtained a permit to test its self-driving car in California and is poised to compete against Google's Waymo and General Motor's Cruise.60
While Baidu has struggled at home and abroad, its competitor Google has continued to attempt to capitalize on the billion Internet users in China. Neither of Google's domestic competitors, Microsoft Bing and Yahoo!, have ever had a strong foothold in the Chinese search market. Can US-based transnational capital give up on the world's largest and fastest-growing Internet market? The answer is absolutely not.
In 2010 Google announced that it was exiting China and moving its servers to Hong Kong because of an alleged Chinese cyberattack on more than thirty different companies, including Google's servers. After Google's announcement, a Microsoft spokesman stated that the company had no plans to move out of or redirect its operations in China. Then Microsoft CEO Steve Ballmer wrote in a blog post about the importance of China for his company and stated its position thus: “We have done business in China for more than twenty years and we intend to stay engaged, which means our business must respect the laws of China.”61 Microsoft remained silent about censorship and the whole hacking incident, not wanting to damage its long-term relationship with China. From Microsoft's perspective, this was a business opportunity with one less competitor.
One year after Google relocated its servers to Hong Kong, Microsoft's Bing search engine tried to seize the opportunity by teaming up with Baidu. The partnership was intended to capture English-language search, which had a 5 percent market share in China, while abandoning the Chinese-language search market. To pursue this partnership, Microsoft complied with Chinese law, stating that “as part of this partnership, Bing will incorporate certain filtering technologies and processes to ensure that we are in compliance with local laws.”62
Google search, Facebook, and Twitter are not accessible in China, but Microsoft's Bing has continued to operate its service on the mainland, though the company holds less than 1 percent of the Chinese search market. Search is only one of many pieces of its business there, however. In fact, Microsoft has been present in China since 1992, and the company once hired former secretary of state Henry Kissinger to advise on political strategy to open up the Chinese market.63 In 1995 Microsoft set up its R&D in China and established its fourth R&D center in Shanghai in 2019, signaling its continuing commitment to the Chinese market. Although it had to respond to the Trump administration's pressure and was forced to cut ties with Huawei, the company warned the US government that the restrictions on Chinese tech firms would eventually hurt US interests, indicating the importance of the Chinese market for Microsoft.64 In fact, in the midst of the Huawei fiasco, Microsoft has been quietly expanding its cloud business in China by operating through the Chinese company 21Vianet.
How about Google? It entered the Chinese market in 2005, gaining more than 35 percent of the search market by number of users by the time it moved operations to Hong Kong in 2010. In the mainstream media, Google's “withdrawal” from the mainland Chinese market was attributed purely to the company's extraordinarily high moral ground in refusing to abide by the Chinese government's censorship policy. But did Google really give up on the world's largest growth market because of its self-claimed business principle “Don't be evil”? The answer is no.
In fact, Google never actually left China. The company itself dismissed the popular claim that it had left the country; in 2012 Daniel Alegre, Google's president of the company's Asia-Pacific operations at the time, stated:
We never left China, and we continue to believe in the market…. It's a very vibrant Internet market. We have some of the best employees at Google and we continue to grow not only our revenue but also our headcount in the country.65
Google was praised for its “idealistic” act of leaving China to protest and evade government censorship, and it was true that it started to deliver its main search service through servers in Hong Kong instead of from mainland China.66 But it was well known that Google kept its R&D operations, offices, and ad business in Beijing and Shanghai; in addition, it didn't cease its other business ventures—like music, maps, online shopping services, and the AdMob mobile ad platform—until much later, and for different reasons. According to the New York Times, in August 2018 Google had more than seven hundred employees in China.67
As a matter of fact, as Reuters reported, Google had shifted its business strategy in China, targeting display advertising, particularly centered around China's growing export firms, which wanted access to global consumers and mobile businesses.68 Given the country's heavy reliance on exports, as much as Google needs the growing Chinese market, Chinese firms also need Google, which reaches 90 percent of Internet users worldwide via its ad network.
Considering these mutual interests, it was no surprise that Google refocused on rapidly growing Chinese exporters who were eager to reach out to overseas markets. In 2016 Sundar Pichai, chief executive officer of Google, reaffirmed Google's interests in China in his public remark: “I care about servicing users globally in every corner. Google is for everyone We want to be in China serving Chinese users.”69
The company maintained Google Adwords Experience Centers in Shenzhen, Songiang, Zhengzhou, Tianjin, Dalian, Shanghai, Guiyang, Changsha, Dongguan, Guangzhou, Foshan, and Zhongshan to train Chinese companies how to use Google platforms for their overseas marketing.70 As part of its agreement to open its Shanghai center in 2016, Google offered to train five hundred Songjiang-based companies and two thousand e-commerce professionals and to generate jobs for the local area.71 In 2015 Google also established a company called Pengji Information Technology in Shanghai's pilot Free Trade Zone. In his interview with the Wall Street Journal in 2015 Sergey Brin said, “We already do quite a lot of business in China, although it has not been an easy country for us.”72 In 2017 Google opened its AI center in Beijing—its first AI research center in Asia—and reintroduced several products such as Android apps Files Go and Translator through Baidu's, Xiaomi's, and Huawei's third-party app stores, and also invested in China's second-largest online retailer, JD.com.
From early on, Google had had no intention of giving up its efforts to gain market share in the world's largest Internet market. After only six months, the company quietly turned off its much-publicized anti-censorship service in China—though it continued to criticize the Chinese government's censorship in public. Considering Google's desperate and persistent efforts to gain a foothold in the Chinese market, the 2018 revelation by the Intercept of Google's censored search engine project for China, called Dragonfly, shouldn't have been a surprise; the company defended Dragonfly, saying that a censored Google service is a better option for Chinese people than Baidu.73 Google abandoned Dragonfly owing to pressure from the Trump administration and its own employees. Yet the firm's further attempts to access the Chinese market have become more complicated and uncertain with the heightening of the geopolitical rivalry between China and the United States over tech supremacy.
American capital's struggles to capture the largest Internet market, and China's increased ability to maneuver within the US-centric information system, have been irritants to the United States. The Trump administration drew much attention for banning Chinese tech platforms from the US market, but the United States and US-based transnational corporations have long been engaged in restricting Chinese firms’ access to the US tech sector and obstructing China's attempts to promote its indigenous technology standards in the international arena.74 The Biden administration's positioning as a global moral leader against authoritarian regimes has continued and broadened its predecessor's policies. The administration expanded the list of Chinese companies banned from US investment under the premise of national security and human rights. As of 2021 the blacklist included fifty-nine firms.75 The Biden administration vowed to take a hard line toward China, shifting its strategy from Trump's unilateralism to enlisting “digital alliances” to counter China. But this “decoupling,” after decades of integration of the US and Chinese economies within and through their respective technology sectors, comes with mounting challenges. As Ming Tang demonstrates, the decades of integration between the US and China have brought about a deep interdependence, from hardware to software to capital investment.76 In 2021 the US Chamber of Commerce released a report stating that the costs related to such a decoupling would be about $190 billion.77
Acknowledging the potential collateral damage, US Treasury Secretary Janet Yellen said that the United States would decouple from China in selective areas to protect its national security and economic interests, but she expressed concerns about a full decoupling on the technological front.78 Along these lines, former Google CEO Eric Schmidt, who chairs the National Security Commission on Artificial Intelligence, joined with Alphabet's Jared Cohen to form and co-chair the China Strategy Group in the fall of 2020. A leaked report by the group stated that “a degree of ‘technological bifurcation’ in the US and Chinese tech sectors” is in America's interest and recommended building a “plurilateral coalition” that includes Japan, Germany, France, Great Britain, Canada, the Netherlands, South Korea, and Finland.79 In February 2021, Schmidt, testifying alongside Microsoft president Brad Smith during a Senate Armed Services Committee hearing, warned that China's economic and technology power was a threat to US economic competitiveness and urged the Congress to focus on boosting the US tech sector through public and private partnerships, which meant that the public would subsidize corporate growth.80 This is a common self-serving argument from the US tech sector, but the influence of tech elites on US policy is undeniable.
As the United States retools its policy toward China, the Chinese party-state is doing the converse, and it has further bolstered its core technologies to move away from a low-wage, labor-intensive economy and reduce its dependence on foreign semiconductor chips, software, and advanced materials in a move that will reshape its political economy and the global power structures of the future.
The question remains, what degree of bifurcation between the two countries could the United States and China afford without damaging domestic and transnational capital for their shared accumulation process? Amid tensions with the United States, China began to craft and impose new technology regulations on the Internet sector. In 2020 the Chinese financial tech company Ant, affiliated with Alibaba, had its IPO listing suspended in Shanghai and Hong Kong under new draft rules for online micro-lending. And the following year the Cyberspace Administration of China removed the Chinese ride-hailing giant DiDi from domestic app stores because of violations of data protection rules right after its landmark listing on the New York Stock Exchange. Meanwhile, in 2021, China released a new data protection, storage, and security law and the following year revised its 2008 anti-monopoly law, which was aimed at the Internet sector. From the Western media's perspective, this was just one big heavy-handed crackdown by the authoritarian regime over its tech sector.81 Yet China has been focused specifically on three major areas that are vital for the growth of the Internet sector—antitrust, data security, and fintech—as it aims to rein in selective tech companies. China's intention was not merely to crack down on its tech giants or decouple from foreign capital, but rather to construct clear Internet regulations (which are still under development) in order to create stable market conditions for domestic and global capital in general.82 Moreover, China is also nudging its Internet giants through regulations and subsidies to shift their consumer-facing businesses to high value–added industrial sectors.83 For long-term economic development, China is willing to take short-term losses to ensure a well-functioning Internet market and promote new industrial policies centered around advanced technologies.
Meanwhile, on the other side of the world, the European Union, where Google dominates 90 percent of the market, is poised to regulate Google's market power, signifying the intensification of intercapitalist competition on the Atlantic front.84
Transnational capital based in the United States is confronting serious obstacles in China. Yet Google, in particular, also faces vicissitudes in Europe despite its overwhelming domination of Europe's search engine market. Since World War II, Europe has had a long history of struggles to challenge US dominance in the information sphere, but it has not been able to build a globally competitive information economy or even autonomous information systems. In fact, Europe's dependence on US information systems has benefited both the United States and US capital. Google's global dominance and the emergence of China's Internet sector in the global arena have again renewed Europe's attempts to rebuild a home-grown Europe-based Internet sector.
The full story of Europe's failed attempts to establish a thriving, multifaceted information industry independent of and competitive with the United States, both individually and within the framework of the European Union, has never fully been told. It started in the immediate postwar period and has impacted digital computers, satellites, data communication networks, and today's Internet systems and applications; competitive tensions pertaining to search must be placed in this larger context.
In 2005, during the French-German ministerial conference, French president Jacques Chirac warned about the dangers of losing the “power of tomorrow” and stated, “We must take the offensive and muster a massive effort.”85 Chirac was responding to US dominance in the Internet industry and to Google in particular. At the conference, Chirac, alongside German chancellor Gerhard Schröder, endorsed a proposal to build a Franco-German Internet search engine called Quaero (Latin for “I Seek”). Later that month, following the conference, Chirac self-servingly declared, “Culture is not merchandise and cannot be left to blind market forces. We must staunchly defend the world's cultural diversity against the looming threat of uniformity. Our power is at stake.”86
With urgency, France and Germany initially agreed to provide $1.3 billion to $2.6 billion over five years in order to build an alternative search engine.87 Technology companies based in Europe such as Thomson, France Télécom, Siemens, and Deutsche Telekom also contributed to the project.88 Yet this effort was far from successful in mobilizing European countries to counterbalance Google; it ended rather ignobly when Germany dropped out of the project in 2007.
According to the New York Times, the main reason for Germany's departure from the project was a disagreement regarding the format of the search engine, with German engineers pursuing a text-based engine and French engineers favoring a multimedia version.89 Yet this is merely part of the story. It was the German government under its new chancellor Angela Merkel—from the Christian Democratic Union, which had just defeated Gerhard Schröder's Social Democratic Party—that shifted Germany's position and dropped the project.90 This was because many of the German participants did not want it to be seen as anti-Google, since many considered Google's technology to be beneficial at that time.91 Rooted in its historical legacy, France was overtly anxious about US dominance of new information spheres and the enrichment of US digital capital at the expense of France; for its part, the German government aspired to ally itself with the United States to be part of the global digital capitalist system.
In 2007, soon after Germany pulled out of the project, its Ministry of Economics and Technology launched the search research project Theseus. Theseus focused on developing new technologies for Internet services based on semantic web technologies, which linked information together via metadata through partnerships with sixty academic institutions and private industry.92 Hendrik Luchtmeier, a spokesman for the ministry, distinguished Theseus from Quaero, stating that Theseus would not develop a search engine per se, but would support private companies and research organizations working in fields including search technologies and advanced communication networks.93 By aiding private IT companies and the public institutions supporting them, the German government intended to build a domestic information sector that would have capacity to compete in and be an integral part of the global information market. The Theseus program, one of Germany's biggest research projects in the field of ICTs, was the main part of its “Digital Germany 2015” initiative, whose goal was to further incorporate ICTs throughout the entire German economy.94 The economic minister at the time, Michael Glos, spoke openly of about Theseus's economic agenda, stating, “New forms of acquiring, searching for and evaluating Internet-based information are of strategic importance for the German governments…With Theseus we want to improve Germany and Europe's ability to compete and reach a top position in IT and communications technology.”95 Neither Quaero nor Theseus, however, has succeeded in countering Google's market dominance. Though there were several attempts by the European Union and EU-based tech companies, none came to fruition. In tandem with these efforts, the European Union had mobilized a new cultural front, Europeana, to challenge Google.
Along with the announcement of Quaero in April 2005, Chirac and the premiers of Germany, Spain, Italy, Poland, and Hungary also sent a letter to the president of the European Commission and recommended that the European Union create a digital library to make Europe's cultural heritage accessible for all. This was a state-centered response to Google Book Search, which had embarked on a project to digitize books, maps, newspapers, paintings, photographs, government documents, and other cultural artifacts from around the world. Jean-Noël Jeanneney, who was the head of the Bibliothèque nationale de France from 2002 to 2007, called out Google's book project as a bid for supremacy based on privileging American culture and privatizing public resources.96 Europeana was the answer to this supposed attack on French and European culture.
An initiative of the European Commission, Europeana aggregates resources from European national libraries, museums, and archives. It was originally part of a larger initiative of the European Commission's five-year economic strategy, called European Information Society 2010, and was meant to build a Europe-based digital marketplace to stimulate the continent's economy.97 The strategy was launched in 2005 to foster economic growth and job creation by prioritizing information sectors within a single European information market and to provide EU investment in research on information-related sectors.98 Given this context, Europeana was not only focused on European Union's cultural agenda but also on its political and economic aims of boosting EU-centered information industries. And the chosen vehicles for achieving this were public-private partnerships to digitize cultural materials. Following in the footsteps of US capital, the European Union moved into its cultural realms, which had not been fully captured by capital, to turn them into a marketplace. Digitization was the first step in this process.
To launch the European Information Society, the European Union called for member states to join forces to build regional information sectors by recruiting cultural institutions, though it did so unevenly. Digitization and the organization of digitized information are expensive, onerous processes that require enormous financing, extensive technical expertise, and a developed digital infrastructure. Few institutions in Europe could afford the cost or had the technical capacity to compete with and outpace Google, especially amid widespread austerity policies. The European Union made clear that it would not pay for the actual digitization work, which was left to individual member nations and institutions. Many European cultural institutions, such as national and university libraries in Italy, Austria, Spain, Ireland, and Great Britain, therefore allied with Google, which was willing to digitize their collections to speed up the process. Google's offer was enticing for many European institutions because it meant the company would digitize the materials free of charge in exchange for adding the digitized materials to Google Book Search as well as Europeana.
France was the exception among European countries in defying any alliance with Google and challenging US dominance of European information sectors. In 2009 president Nicolas Sarkozy vowed to spend $1.08 billion toward digitization of the content of French museums, libraries, and cinematographic heritage organizations.99 He warned that he would not allow Google to “carry out a massive literary land grab on French and other European literature.”100 Sarkozy stated, “We won't let ourselves be stripped of our heritage to the benefit of a big company, no matter how friendly, big or American it is”101 and further vowed, “We are not going to be deprived of what generations and generations have produced in the French language just because we weren't capable of funding our own digitization project.”102
The plan was for France to use existing digital collections within the Gallica project, which digitized national collections, and challenge Google. Sarkozy emphasized the importance of public-private partnerships in digitizing his nation's cultural works. France aimed to build up Gallica's collections by partnering with French publishers and private companies.103 This public-private partnership was a step toward exploitative privatization of public resources. France's overarching concern was to erode US dominance in the information market and reserve France's cultural heritage for French commercial interests, not to attack capitalist development of information provision.
In December 2009, after France had said no to Google—the president of a French publishing industry group had called it “cultural rape”104—and decided to pursue its own digitization project, Minister of Culture Frédéric Mitterrand, nephew of former president François Mitterrand, and Google executive David Drummond met in Paris to discuss France's concerns. In a New York Times interview, Bruno Racine, president of the Bibliothèque nationale de France (2007–2016), asserted the “necessity of a partnership with the private sector in order to secure the capital needed for vast digitization projects.”105 Racine's position shifted from that of his predecessor, Jean-Noël Jeanneney, who had been a fierce opponent of Google Books. France left the door open for Google to be part of the public-private partnership. According to a diplomatic cable made public by WikiLeaks, the reason Mitterrand altered his position was that it would cost $1.5 billion and require technical expertise to digitize fourteen million works in the library, and Google had agreed to create jobs in France and open a scanning facility in Lyon as part of its digitization agreement with the University of Lyon.106
By January 2010 France had succumbed to working with Google on the digitization of books at its national library, but it insisted that it would not allow Google to have legal control over digitized materials. Google was demanding exclusive control over the works for a period of twenty to twenty-five years. Mitterrand stated, “Google came to Europe with the attitude of a conqueror, and many opened the door to it by signing deals which I find unacceptable, [that] are based on excessive confidentiality, impossible exclusivity, and a casual, even one-sided approach to copyright. We will propose to them…to exchange files without confidentiality or exclusivity, in total transparency and with total respect for copyright.”107
France aspired to control its own information and culture and insisted that Google drop the exclusivity clauses in the agreement.108 Yet before the French government's official announcement of the partnership with Google, the Bibliothèque Municipale in Lyon had forged a deal allowing Google to digitize its entire book collection and to give the company the commercial rights to the works for twenty-five years.109 It became the first library in France to partner with Google to digitize books.
France had led Europe in voicing its opposition to US control over information and culture, but there were signs that France was gradually having its information sphere taken over by US-based transnational capital and marching toward the privatization of its own cultural materials. In 2013 the Ministry of Culture announced a public-private partnership between the Bibliothèque nationale de France and US-based ProQuest to digitize more than seventy thousand books, two hundred thousand sound recordings, and other documents in the public domain. The European public domain advocacy organization Communia pointed out that ProQuest would retain ten-year exclusive agreements allowing the private company to host and commercialize the digitized collections while limiting online access during the period of digitization.110
American capital was not merely going after a segment of culture; it was eyeing the entire span of cultural spaces in France and Europe more widely to bring them into their profit-making realm. The Google Cultural Institute, launched in 2011, aimed to digitize cultural materials from museums and archives around the world and gobble them up into its business of information.111 The Google Cultural Institute established its headquarters in Paris to preemptively occupy the untapped cultural information sphere as it swallowed French symbols of culture from the Eiffel Tower to Versailles to the Paris Opera and even street art into Google's digital territory.
American capital devoured a massive reservoir of culture that would be a new source of profit-making, but not without opposition. Google's relentless advances into Europe's cultural and information spheres have stirred Europe's deep-seated anxiety over US information dominance. But the battle is not merely between European and US-based capital; it is also between US rivals. Much of the US-based Internet capital was looking for competitive advantage extraterritorially by making use of European legal authority in the jurisdiction of the European Union. As a result, Europe turned into a major battlefield for US inter-capitalist rivalries.
In 2010 the European Commission, the European Union's executive body and the twenty-seven-nation bloc's antitrust authority, officially opened an antitrust case against Google, which concerned whether the company was penalizing its competitors in search rankings. The case was initiated by four companies based in Europe: the French legal search engine Ejustice.fr, 1PlusV (the parent company of Ejustice.fr), the UK-based Foundem, and Germany-based Ciao!, which was owned by Microsoft at the time of the case. These four companies filed official complaints with the European Union, stating that Google's search algorithm had had significant negative consequences for their website traffic. On the surface, it seemed that the case had been brought to protest against Google's dominance in the European market. In point of fact, though, as Nicolas Petit, a professor of competition law at the University of Liege, Belgium, pointed out, “Everyone understands here in Brussels that it's Microsoft versus Google.”112 At the time of the investigation, Microsoft was one of the leading lobbyists in Europe, with more than $5 million spent in 2014.113 Close behind Microsoft, Google spent between $3.94 million to $4.23 million in 2014.114
Backed by its lobbying efforts, Microsoft was one of the leading companies behind numerous EU antitrust complaints against Google, doing so to object to Google's giving preference to its own services and advertisers in search rankings. Microsoft used several lobbying groups as fronts to urge the European Commission to probe Google's business practices. The Financial Times uncovered the fact that Foundem was supported by the Initiative for a Competitive Online Marketplace, a Microsoft-backed lobbying group.115
In addition to Foundem, Ciao!—formerly a longtime Google AdSense partner, but acquired by Microsoft in 2008 and sold in 2012 to LeGuide Group, the European online shopping guide—initially took its antitrust case to the German competition authority but moved it to the European Commission to have legal standing throughout Europe. In March 2011 Microsoft itself filed a formal complaint with the commission, stating that Google had engaged in an unfair, anticompetitive “pattern of actions.”116 TripAdvisor, a travel review website, also joined the EU competition complaints against Google. TripAdvisor, along with Microsoft, was one of the founding members of FairSearch, which was created after Google had acquired flight-booking software program ITA in 2010. Members of FairSearch also include other major US-based Google competitors Expedia, Hotwire, Kayak, and Oracle.
In April 2013 the European Commission concluded that Google may have breached antitrust rules and could have fined the company as much as 10 percent of its annual worldwide revenue,117 but it allowed Google to submit a proposal to address its concerns. Soon afterward, however, Google's rivals pressured the commission to reject Google's proposal, which promised to label Google's own services and show links to rival services in its search results. FairSearch's chief counsel Thomas Vinje harshly criticized Google's proposal, saying that it merely reaffirmed the company's monopoly.118 Under pressure from the lobbying groups backed by US tech firms, the European Union made Google agree to further concessions to settle the case. In February 2014, Google agreed to alter the way its search results displayed competitors’ links, seemingly putting an end to the three-year antitrust probe and avoiding a heavy fine.
Yet along with the US tech firms, European capital also mobilized opposition to Google's proposed settlement with the European Union. A group called the Open Internet Project, supported by the German media giant Axel Springer, the leading French mobile media group Internet Lagardère Active, and twelve hundred European digital companies, lobbied the commission to revisit its decision concerning the Google settlement.119 More than thirty publishers from the European Association of Newspapers also requested that the European Union reject Google's proposal, arguing that the settlement would secure Google's dominance and continue to stymie competition.120 Arnaud Montebourg, France's Minister of Economy at the time, compared Google to “a new East India Company” seeking to ravage European wealth.121 The German Economy Minister, Sigmar Gabriel, even called for breaking up Google's monopoly, asking to “re-establish the sovereignty of law by ruling that Google can no longer simply bypass European standards.”122
In 2014 Europe's fear of US dominance was reignited with Edward Snowden's exposure of the US National Security Agency (NSA) and its secret global surveillance programs. Given the scale of such activities and the fact that the NSA collected data directly from the servers of major Internet firms including Microsoft, Google, Apple, Yahoo!, and others, EU member states were looking to tighten the reins on Google and other US Internet firms.
Despite Google's vehement denials, there were several reports of the company's collaboration with and close ties to the NSA.123 After Snowden's news broke, Google quickly turned up its PR machine as it and other US Internet firms recognized that NSA's Prism program would cost their businesses, which rely heavily on international markets. For example, IBM spent a billion dollars to build a data center outside the United States to assure its international clients that their data would be safe from US government surveillance.124 Microsoft now offers foreign customers the option of storing their data on servers outside the United States.125 The company opened data centers in Germany and strategically put Deutsche Telecom in charge of the data centers’ operations.126
In 2015 the EC Commissioner for Competition, Margrethe Vestager, formerly the finance minister of Denmark, renewed the European Union's charges against Google's dominance in search and officially opened a second investigation of Google and its Android mobile operating system. This time, the European Commission charged the company with anticompetitive behavior because it required mobile manufacturers to pre-install Google products and services. In the following year, the European Union brought a third antitrust case against Google for favoring its own shopping services and using its dominant market position to prevent the display of ads from competitors.127
It is interesting that in 2016, in the midst of this ardent battle Microsoft, one of Google's most outspoken opponents, suddenly agreed to a pact with Google to drop all pending regulatory complaints against each other. And Microsoft withdrew from its memberships in FairSearch and Initiative for a Competitive Online Marketplace, the two lobbying groups in which Microsoft had been deeply involved to support antitrust actions against Google's search business in Europe.128 Microsoft's new attitude toward Google was a practical move given that this long, draining legal battle had no guarantee of financial or market gains, but more important, it was more an indication of shifts in business priorities. Microsoft was repositioning itself by moving into cloud computing and artificial intelligence, which are built on “big data.” Therefore, the company shifted its lobbying priorities in Europe, particularly toward data-related policy such as privacy and data protection.129 It needed to forge relationships with major competitors such as Google to lobby against the European Union's data protection rules, which impacted the entire industry. The heavy hitter Microsoft had moved on, but there were plenty of Google competitors remaining on both sides of the Atlantic to continue challenging the company. In 2017, under EU competition chief Margrethe Vestager, Google was hit with a record $2.7 billion fine for the promotion of its own shopping service, with its rivals demanding stronger regulatory measures. Subsequently, in 2019, the European Union fined Google $5 billion for using Android OS to embed other Google services and $1.7 billion for abusing its dominant position in online advertising. Far from retreating from reining in US tech giants, Brussels continues forging ahead with full force.
The current president of the European Commission, Ursula von der Leye, is poised to take a leading role in global tech regulation including AI, big data, privacy, antitrust, and facial-recognition technology. The European Union reappointed Margrethe Vestager as its competition chief and bestowed on her a new title, Executive Vice President for a Europe Fit for the Digital Age. Vestager invigorated oversight of the tech industry and garnered hefty fines from US tech giants including Google and Apple; her new position extends her power across digital sectors in which tech firms are heavily invested, including finance and automobiles. Moreover, US tech firms are not the only objects of scrutiny by EU authorities. Member states have also demanded that the European Union look into Chinese state-owned companies acquiring EU assets as China increases its footprint in Europe.130 China's total foreign direct investment (FDI) in the European Union—which includes mergers and acquisitions and greenfield FDI—had risen from €7.6 billion in 2013 to over €$44 billion in 2016, outpacing European FDI in China.131 Since its peak, mergers and acquisitions FDI has declined due to China's regulatory control over outbound capital, geopolitical tensions, and the COVID-19 pandemic, but greenfield FDI—where a company establishes a subsidiary in a foreign country—has increased from an average of 6.5 percent of total FDI to 20 percent in 2020.132 The United Kingdom, Germany, and France accounted for 50 percent of China's total FDI in the EU market in 2020.133 The European Union sees China as a new rival; however, it has not ruled out China as a new potential strategic ally hedging against the United States and as a partner in building the EU tech sector.
In 2019 the Chinese equipment vendors Huawei and ZTE held more than 40 percent of the EU market.134 Amid the trade dispute between the United States and China during the Trump administration, the United States pressured the European Union to ban Huawei, the leading supplier of 5G technologies, from participating in the development of European 5G infrastructure. The US government was even considering funding European rivals Nokia and Ericsson as alternative 5G suppliers.135 Nokia and Ericsson were caught in the crossfire. Along with Great Britain, Sweden had banned Huawei and ZTE as 5G equipment suppliers. State-owned China Mobile, the world's biggest wireless carrier, shrank its 5G equipment contracts with foreign suppliers from 11 percent of total contracts awarded in 2020 to 5.4 percent in 2021. The Swedish vendor Ericsson faced the biggest cut; it was the sole foreign supplier in 2020, but its China Mobile contract was reduced in 2021 to 1.9 percent of the total of 5.4 percent. Meanwhile, the Finnish telecom company Nokia took the major share of the Chinese contracts awarded to foreign companies, at 3.5 percent of an estimated $6 billion.136
So far Europe hasn't shown a united front in responding to US pressure to drop Chinese telecom vendors. Germany, France, and other European countries, defying the United States, have refused to exclude Huawei in building out their 5G networks. But the Biden administration, under the self-serving principle of fighting against “tech-autocracies,” quickly tried to rebuild alliances by renewing transatlantic relationships, creating the EU-US Trade and Technology Council to extend bilateral trade in the tech sector, and, to isolate China further, also shored up its alliances with South Korea, Japan, and Taiwan.137 Presenting a new agenda for the newly formed council, EU foreign affairs minister Josep Borrell made assurances that this new alliance was not meant to exclude or isolate China from the economic and tech sectors, stating, “We need China.”138
The European Union is pushing dual strategies: leading global tech regulatory regimes as well as creating an EU-based information industry to respond to China and the United States. So far, the European Union doesn't have its own tech behemoths to compete with these, but it is increasingly weaponizing its regulatory power to challenge the US and Chinese Internet sectors. According to a 2019 survey, the majority of global tech policy was coming from either the European Union or from EU member states.139 In 2018 a major data protection policy called the General Data Protection Regulation was implemented across the European Union. It was designed to protect EU citizens’ personal data from tech companies and organizations. Violators would be fined up to $23 million or 4 percent of their global revenue, whichever was higher. The regulation was viewed as a model for other countries struggling to figure out ways to limit personal data collection by the tech industry. In 2021 the European Commission overhauled its Internet regulations and proposed the Digital Services Act and the Digital Markets Act. The former focuses on the online advertising industry while the latter deals with market power and global tech giants that are considered gatekeepers hindering new entries into the market. These expansive proposals aim to tame the Silicon Valley tech giants and create more competitive market conditions for EU-based companies.
Yet by no means are Google and US tech companies merely on the defensive regarding these new European Internet rules and regulations. They are aggressively engaging in lobbying efforts. Google has the most extensive lobbying operation in Brussels and in major European capitals, and its business operations in Europe have expanded over the years. In 2012 Google opened a Berlin office in Unter den Linden, the European Union mecca for lobbyists. In 2013 according to Der Spiegel, Google began to build its lobbying network of PR professionals, activists, and academics.140 The newspaper noted that a former Google lobbyist worked for the German Foreign Ministry, where he co-organized a conference along with Aarhus University, Human Rights Watch, and the Humboldt Institute for Internet and Society on the theme of Internet and Human Rights.141 This is one of Google's more artful tactics; as the company attempts to mobilize activists, academics, and government officials to pursue the twin virtues of “human rights” and “Internet freedom,” to which few would object, this actually is an attempt to shield its corporate interests. In 2021 the Financial Times reported that a leaked internal Google document revealed that the company's lobbying strategies were to remove “unreasonable constraints” on Google's business model and shift the political discourse regarding the proposed EU Digital Services Act and Digital Marketing Act in Brussels, stressing that these regulations would economically impact Europeans and limit the potential of the Internet.142 According to a 2021 Transparency International report, Google was the top lobbying spender that year and had the most meetings with members of the European Parliament.143 In 2020 Google spent €5.75 million on lobbying in the European Union, and combined with Amazon, Facebook, and Apple, US tech lobbying budgets reached €19 million, or $23 million, and have increased almost threefold since 2014.144 Margarida Silva of Corporate Europe Observatory noted that “the budgets are really unrivaled—we've never seen this kind of money being spent by companies directly.”145
For the European Union, regulatory influence alone is not sufficient to curtail US and Chinese tech power. The European Union intends to build its own digital economy and is setting up a €100 billon sovereign wealth fund to back European-based tech companies in their competition against Google, Facebook, and Amazon.146 The German government has pushed for cloud independence and a European-based cloud network called Gaia-X to challenge Amazon Cloud, and France has joined this effort. In a 2019 German-French joint meeting, France's Economy and Finance Minister, Bruno Le Maire, said: “We want to establish a safe and sovereign European data infrastructure, including data warehouses and data pooling and develop data interoperability.” Germany's Minister for Economic Affairs, Peter Altmaier, said that this cloud computing initiative would help Europe “regain” its “digital sovereignty.”147 In 2021 the European Commission launched an initiative called the EU Startup Nations Standard, which seeks to create friendly conditions for startups to catch up with the United States and China. By 2022, twenty-five European countries had joined this initiative. The questions for the European Union are, against the encroachment of the United States and China, will the European Union be able to maneuver between the two global power blocs (which are its largest trading partners) and national, European bloc, and transnational capital interests? In what ways will its regulatory forays limit or restrict the development of an EU-based tech sector?
This examination of search elucidates that the Internet is at the leading edge of the transnational capitalist market system and has turned into a major geopolitical, economic, and intercapitalist fissure. Google's struggles in moving into the Chinese Internet market have been persistently seen as an “intranet” managed by China, whose dynamic Internet sector is tightly intertwined not only with the global Internet market but also with global capitalism.
China's far-reaching success in building its domestic Internet sector, which is undercutting the long-time dominance of US-centric Internet systems and services, has escalated anxiety in the United States, driving the its aggressive policy, from tariffs to restrictions on investment in Chinese tech companies, investing in domestic technologies, and rearranging its global alliances. Amid tensions between the United States and China, the European Union, a major arena for US rivals, is leveraging its position and asserting its power by setting up new global Internet regulations. The rivalry between the United States, the European Union, and China over the Internet, which has been woven into the global political economy, animates the restructuring of US-led digital capitalism.
Because the United States is determined to maintain its dominant position, the Biden administration swiftly brought up the familiar virtues of “democracy,” “freedom,” and “human rights,” which obfuscate its real objectives. It is certain that the US government and major US firms such as Google will continue to push to maintain and shape the Internet in their favor. This cross-border inflection isn't about “a battle between the utility of democracies and autocracies in the 21st century,” as Biden claims.148 The conflict is about which capitalist states and which capital will have the upper hand in controlling the Internet, the axis of global capitalism today. The United States continues to attempt to keep China and the European Union within the US-led global capitalist system. At the same time, the counterpressures are intensifying as the new geopolitical landscape, accompanying the changing power structure of transnational capitalism, enters a phase of global power realignment and political economic dynamics that will further disrupt US-led global digital capitalism.