MULTINATIONALS: Whatsapp Bows, Microsoft Visits, Google Plays

Bottom line: Whatsapp has likely been permanently blocked in China, while Satya Nadella’s visit to Xiaomi underscores Microsoft’s growing ties  with the company, and Google’s China AI push is mostly PR.

Whatsapp booted from China?

A couple of the big high-tech multinationals are in the headlines as we head into the next-to-last month of the year, which seems like a good opportunity to review where these companies stand heading into the second term of President Xi Jinping and also as Donald Trump gets set to make his first China visit. One of those headlines involves Google (Nasdaq: GOOG), and comes in a soft-ish report pointing out the company is actively pushing its artificial intelligence (AI) development software in China.

Next there is Microsoft (Nasdaq: MSFT) CEO Satya Nadella, who is in China this week where he paid a visit on recovering smartphone maker Xiaomi. I’m not a huge fan of Microsoft’s strategy in general. But its growing ties with Xiaomi do look like an interesting new approach that could ultimately pay off nice dividends under Nadella’s 3-year-old leadership at the software giant. 

Last but certainly not least, there’s the latest update on instant messaging app Whatsapp, which appears to be getting an RIP in China, following in the footsteps of just about every other popular offshore-based social networking app. I personally am quite sad about this one, as I use the app to communicate with a lot of my friends outside China. But on a more significant note, this development appears to show that all the goodwill from Whatsapp’s owner Facebook (Nasdaq: FB) over the last 5 or 6 years hasn’t been worth too much.

The bigger theme to these three news bits is that China’s Internet and high-tech realm in general remain open for business for foreigners, but very much on Beijing’s terms. Anyone who wants to play ball under those terms is welcome. If you’re more interested in things like freedom of expression, then perhaps it’s best to take your business elsewhere.

Facebook has learned that lesson through experience. Its main site was blocked back in 2009 because it wouldn’t self-censor content to filter out accounts and information that were objectionable to Beijing. The main website didn’t even have a China presence back then, so it didn’t really seem to care that much. Still, founder Mark Zuckerberg has become a frequent visitor to China and made it clear that he wants to have some kind of presence in the country.

I’ve been predicting for a while that Zuckerberg might finally get permission to set up a joint venture that would bring Facebook in some form to China. But now the Internet giant appears to be moving in the other direction, with what appears to be the permanent blocking of Whatsapp here. Whatsapp was the last of the major global social networking apps that was still available in China, surviving where rivals like Line and Instagram failed.

But the service began to “experience” spotty outages around a month ago, and now appears to be down permanently, based on my experience. A similar pattern happened a few years back for Google’s China-focused search site in Hong Kong, and also Gmail, and I’m fairly confident Whatsapp has been pretty much permanently banned from China at this point. That doesn’t mean we won’t see Facebook ultimately get permission to set up a joint venture here. But the bottom line is that you have to play by China’s rules, which means self-censoring to eliminate Beijing-sensitive content.

Microsoft in New Dance

Next there’s Microsoft, whose news looks a little frivolous on the surface but may be a little more substantive. That one has Nadella visiting the campus of Xiaomi, which was formerly a smartphone sensation that later fell on hard times and now looks on the cusp of a modest comeback. (Chinese article) Nadella’s visit was revealed in a blog post by Xiaomi CEO Lei Jun, who gave one of Xiaomi’s latest models to the Microsoft CEO and said the pair have a very close relationship.

That relationship dates back a little more than a year ago, when Microsoft transferred its smartphone patents to Xiaomi, many of those related to its failed foray in the space after buying Nokia’s former smartphone business. No terms were ever given for that deal, but I speculated at that time that no cash probably changed hands, and instead Xiaomi probably gave Microsoft an equity stake of 10-20 percent.

Thus this latest visit and blog post appear to show that Nadella is trying to spin off some of Microsoft’s less core businesses and work closely with third-party business partners. That looks like a smarter strategy than what Microsoft previously did, namely trying to develop this kind of new product and service in-house.

Finally there’s the Google news, which looks a bit PR-ish. The company has been trying to work its way back into Beijing’s good graces following their famous blow-up in 2010, in a bid to launch a Chinese version of its Google Play Store. This latest effort looks like part of that drive. The report in Bloomberg says the Internet giant is actively promoting its TensorFlo software, which is aimed at developing apps with AI.

This looks like an extension of Google’s earlier move to restart its developers forums to encourage development of Chinese apps for its popular Android operating system. Anyone living in China knows AI is currently one of Beijing’s hottest buzzwords, and central government authorities will be quite pleased to see such a big name like Google jumping onto the AI bandwagon. Of course I still believe that Google’s ultimate goal is to get its Play Store into China, but when that might happen is still anyone’s guess.

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