Marissa Mayer’s Yahoo increasingly dependent on ethically problematic China business

Marissa Mayer’s Yahoo increasingly dependent on ethically problematic China business

Marissa Mayer, Shi TaoYahoo CEO Marissa Mayer reported on the firm’s financial results for the quarter last week – and advertising revenues at the struggling company are down.

Mayer, who also sits on Walmart’s board of directors, attempted to put a positive spin on the company’s results. But Business Insider’s Nicholas Carlson suggests that Yahoo’s core business is “imploding.”

Despite its revenue problems, however, Carlson and the New York Times both report that Yahoo’s stock price has been bolstered by its 24% ownership stake in Alibaba – the successful Chinese ecommerce company.

Yahoo’s China business may provide a short-term boost to Mayer’s bottom line but it also makes the company complicit with the Chinese government’s extensive regime of internet censorship and surveillance. Yahoo’s stake in Alibaba gives Mayer the right to pick one out of four Alibaba directors and Alibaba runs Yahoo’s search operation in China.

Marissa Mayer thus joins fellow Walmart director Greg Penner in the small club of U.S. business executives who have effectively accepted responsibility for carrying out the Chinese state’s internet policies. Penner, an investor and director of the Chinese internet company Baidu, has faced public criticism over this issue.

Increased attention to Yahoo’s China business may pose reputational risks to Yahoo and its celebrity CEO.

The company has already run into serious problems over its role in China. In 2005, Chinese journalist Shi Tao was sentenced to 10 years in prison for pro-democracy activities after Yahoo supplied Chinese authorities with information about his use of the internet. Mr. Shi is still in jail today (see also here and here).

Following negative publicity, Yahoo apologized for its role in the conviction of Mr. Shi and several others. But the company does not appear to have made substantive changes to its operations, other than delegating direct control over Yahoo China to Alibaba.

For its part, Alibaba is clearly on board with the Chinese government’s program. In 2011, Alibaba CEO Jack Ma joined other Chinese internet executives in a public pledge to support government censorship.

According to the human rights group Freedom House, Ma has upheld his commitment.

In its tests, Freedom House found that Yahoo.cn produced search results that were as heavily restricted and dominated by Chinese government links as those of Baidu, and sometimes even more restrictive.

Jack Ma, Alibaba CEO

Jack Ma, Alibaba CEO (Source: VentureBeat)

Yahoo has sought to evade criticism by claiming that it does not directly control its own operations in China but Amnesty International isn’t buying it.

… Yahoo! should not consider it an option to arrange a business relationship with a Chinese internet company and then cite its own lack of control over its operations as an excuse for not taking pro-active steps to stop involvement in abuse of freedom of expression or privacy rights.

Does it really matter what Yahoo and other internet companies do in China? Journalist and internet freedom activist Rebecca MacKinnon makes a convincing case that it does:

This censored environment makes it easier for the Chinese government to lie to its people, steal from them, turn a blind eye when they are poisoned with tainted foodstuffs, and cover up their children’s deaths due to substandard building codes. It is a constant struggle, and sometimes literally a crime, for people to share information about such matters or to use the Internet to mobilize against corruption and malfeasance.

That is the information environment that China’s business elites, many of whom have gotten rich running Internet and telecommunications companies, are responsible for helping to build and maintain.

MacKinnon wrote those words in a 2010 article saluting Google’s decision to leave China rather than continue to be complicit with the government’s regime of censorship and surveillance.

It’s ironic that Mayer came to Yahoo from Google, whose motto is “Don’t be evil.”

Here’s hoping it’s not too late for Ms. Mayer to bring a little of that attitude to her work at Yahoo or even – if she’s really up for a challenge – Walmart.

UPDATE April 23, 2013

Yahoo announced yesterday that it will close its email business in China. However, Yahoo suggests that current users move to an email service run by Alibaba. Alibaba will continue to operate Yahoo’s search engine in China. Yahoo continues to own about 24% of Alibaba and retains one seat on Alibaba’s four-member board of directors. The fact that Yahoo is closing its email operations in China does not, therefore, address the company’s complicity with the Chinese state’s internet policy regime.

What do you think?