Category — Google

After reviewing articles from many sources in the media, I have compiled a list of certain  facts and figures regarding   the recent cyber attacks  from China and the subsequent stunning announcement from Google.   Some  of these are surprisingly under-reported  in the media so you may or may not know them.  Here they are in no specific order  :

1. Over 34 companies were targets of the attack and appear to have been carefully selected to be in industries in which China is lagging. Sources say that one aim of the attack was to steal high-tech information in strategic industries to give China a competitive economic edge.   For example,  the attacks on defense companies were  aimed to steal information on weapons systems. The attacks on  technology companies were mainly to get the  source code  of the companies flagship products.
2. Sources also say that the second aim of the  attacks was  to get  politically sensitive information to  ensure the survival of the regime.   This was stated by James A. Lewis, a cyber and national security expert at the Center for Strategic and International Studies.
3. The attacks revealed the existence of a vast cyber espionage network -  GhostNet - with origins in China — that at last count had  infected  at least 1,295 computers in 103 countries. Of the infected computers  close to 30% can be considered as high-value diplomatic, political, economic, and military targets (including the office of the Dalai Lama, foreign embassies, large corporations and government offices).
4. GhostNet spreads by “phishing” - i.e.  sending fake emails that appear to come from familiar names with contextually relevant subject lines to specific recipients with attachments that contain the malware or Trojan programs that infect the computer and take advantage of known flaws in the software installed on the target computer.
5. GhostNet uses  a Trojan  program  known as gh0st RAT that allows the attackers to gain complete, real-time remote control of target computers.  The  infected computers have been traced  to be   controlled from commercial Internet access accounts located on the island of  Hainan, People’s Republic of China.
6. GhostNet is capable of taking full control of infected computers, including searching and downloading specific files, and  operating attached devices, including microphones and web cameras. The attacker can  not only control but also see and hear everything that is happening at the target computer, remotely !
7. The attackers also exploited a flaw in Adobe’s  Acrobat  PDF Reader.  This flaw was  discovered  on Dec 15, 2009  but was  fixed only on Tuesday, Jan 12, 2009  – the day of the   Google announcment.  (So everyone should head on down to Adobe and download the fix immediately). Update : 1/17/2010 : McAfee reports  that these initial reports about a flaw in Adobe Acrobat are false. The flaw that was actually exploited was in Internet Explorer 6.
8. China currently has between 300 million to  400 million active internet users - more than any other nation in the world including the US.  By 2013, China is estimated to have 840 million active internet users - again the largest internet  population of any nation. Chinese will at that point replace English as the most widely used language on the Internet.
9. The two top internet search engines in China are Baidu and Google. Baidu controls 61% of the market and Google 31% - together accounting for 94% of all  searches done in China.
10. Although Baidu is widely reported as a Chinese owned search engine - its majority stock holders are actually American institutional investors like Morgan Stanley and Fidelity.   It is traded on the NASDAQ (stock : BIDU) and was taken public by American firms.   Its initial funding came from Silicon Valley Venture Capital firms including  Draper Fisher Jurvetson and IDG Technology Venture.  Google itself was an early stage investor but sold its stake when it entered the Chinese market.
11. Google entered China in 2006 with the launch of Google.cn   after much internal debate and after agreeing to censor results in compliance with the Chinese Government’s policies.   However, Google.cn  does display  a message informing Chinese users that their searches  may not display all results in order to comply with the policies of their government.
12. It has been suggested by Peter Scheer of Huffington Post  that the  majorty shareholders who are  US investors could potentially pressure Baidu’s Board to c0-operate with Google and defy  China’s censorship policies. “That would be extraordinary—corporate civil disobedience squared.” he says in a blog post today.
13. Google is projected to earn between  $250 million to $600 million in revenues from China this year, a very small fraction (between 1% to 2.5%)  of  Google’s  $22 billion annual  revenues.
14. Google’s founders, Larry Page and Sergey Brin together own  shares with 58% of the voting power of all shares and have veto power over everyone else, including the company’s chief executive, Eric Schmidt who has less than 10%.  Google’s founders have very strong ideas about ethical business practices. They  even advised people not to buy Google’s stock during their IPO in 2004,  unless they felt comfortable with their unconventional approach to business.
15. Shareholder proposals demanding that Google defy China’s censorship policies have been presented to the board several times since 2006 when Google entered China.  So far, CEO Eric Shcmidt has consistently voted against these proposals  in order to protect Google’s  franchise as China becomes the largest internet market.   Larry Page has also  voted against these proposals.  Sergey Brin  whose family fled communist Soviet Union when he was six, has abstained from voting to show his symbolic support of the proposals.  The incident on Tuesday jas apparently tipped the scale in favor of these proposals.

Google’s bombshell  announcement yesterday about its “new approach” to China is still reverberating across the media and the blogosphere.    Everyone is trying  to put this in perspective, assessing its impact and figuring out  Google’s true  motivations and rationale for this drastic action.   However,  most blogs and analysis focused on two important aspects of this story : Google’s tough stance against the freedom and censorship issues in China   and the business implications of this for Google.  But very few address  another equally important aspect :  The warning to the free world of  the clear and present danger of Chinese cyber attacks and cyber warfare .  Here is a quick rundown of some popular reactions :

Many bloggers and analysts are saying that Google deserves kudos for this tough and brave stance against censorship and oppression in China,  and that they are living up to their “don’t be evil” motto.   Rebecca MackInnon has an excellent post  titled “Google puts its foot down” and writes :

“ They are living up to their “don’t be evil” motto - much mocked of late - and living up to their commitments to free speech and privacy as a member of the Global Network Initiative. “

This sentiment was echoed by many bloggers and media analysts and was certainly a factor in Google’s decision.

However,  many including Sarah Lacy of Techcrunch say  this is  “more about business than thwarting evil”

“  Does anyone really think Google would be doing this if it had top market share in the country? For one thing, I’d guess that would open them up to shareholder lawsuits. Google is a for-profit, publicly-held company at the end of the day….”

William Haven asks “Does The Internet Giant Really Deserve Our Praise ?” and writes :

“Google was struggling in competition with Baidu, China’s most popular search engine. Baidu.com holds over 60 per cent of China’s search engine market while Google.cn – at its best - has held just over half that. So perhaps Google is simply trying to spin a business decision. ”

I do not agree as both the above arguments regarding market share are untenable  - 30% market share in a country with 300  million active internet users is still a huge business and very profitable to boot !  Business decisions are based on profits and not market share - unless  you  claim  that Google’s business model requires it to be #1 in every market that it operates in. By that reasoning,  Yahoo which has a mere 10% share of the search market or Bing  which has 5% share should have shut down operations long back.  And Avis should not be in the car rental business !

And here is Robert Scoble  - who makes the same point very well in his blog post :

“ UPDATE: A Google Spokesperson just emailed me this: “This is not about market share. While our revenues from China are really immaterial, we did just have our best ever quarter [in China].”“

So while  a stance against censorship is  laudable, a stance against censorship at the cost of  potentially millions of dollars  in  profits  is  unprecedented in corporate America and is  deserving of nothing short of  a Nobel  Peace Prize  for Larry, Sergey, Eric and the rest of the team  at Google !

But all of this still misses one very  important aspect about Google’s announcement.  The very first reason they cited in Google’s announcement  was :

” First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.”

I think Google intends this to  be a warning about the the dire threat of  cyber attacks and cyber warfare posed by China and should be regarded as an  urgent wake-up call for  America, Europe and the free world.

“The investigation ultimately uncovered a network of over 1,295 infected hosts in 103 countries. Up to 30% of the infected hosts are considered high-value target and include computers located at ministries of foreign affairs, embassies, international organizations, news media, and NGOs. ”

“Chinese authorities have made it clear that they consider cyberspace a strategic domain, one which helps redress the military imbalance between China and the rest of the world (particularly the United States). They have correctly identifed cyberspace as the strategic fulcrum upon which U.S. military and economic dominance depends. “

So I  fervently hope that Google’s bold move will put in motion a chain reaction of counter-measures  that will prevent an  electronic 9/11  from happening.  And more importantly halt  a seemingly unstoppable adversary  from achieving their stated goals of electronic world domination via cyber warfare.     The skeptics will of course call this analysis an over-reaction and paranoia.  But no one believed  that a bunch of 20-year-olds  could fly jumbo jets into skyscrapers either,  although evidence of this possibility was staring at us all the time.   The fact that the most powerful internet company in the world has validated  the reality of this threat should be fair warning to all of us.

In what will surely be remembered as a pivotal and defining moment in Internet history, Google today took a brave stand against China which has so  far dictated how Google  conducts business in that country.

In a post on their blog titled “A New Approach To China”, Google stated that it had detected an unprecedented and highly sophisticated attack by Chinese hackers last month on its corporate infrastructure, and on 20 other corporate entities. The hacking has resulted  in theft of some of Google’s Intellectual Property. Google has also determined that the hackers were primarily targeting the Gmail accounts of  Chinese human rights activists. Possibly there was much more - since Google has only shared some of the information from these attacks. In any case, the attacks appeared to be the tipping point for Google in revising their stance on China.

Effectively this is what Google is saying to China in their announcement  : “We are not going to succumb to your censorship policies  any more and enough is enough   :  So take it or leave it -  we  will either run an uncensored search engine in China on our terms OR  just cease operations there ! “

Putting an economic juggernaut and the next superpower on notice in no uncertain terms  on a matter of principle  requires tremendous guts and vision.   It has never been done, as far as I know, by any large US  corporation (or even by the US Govt for that matter !)  . If ever there was a moment in Google’s decade old history which demonstrated  their resolve and  the true intent of  their  corporate motto “Don’t do evil”  - this has to be  it !    Google deserves the utmost respect and accolades from everybody for this brave stance.   I only wish they had done it sooner in 2006 when they launched Google.cn.  Succumbing to  the unreasonable demands of a communist regime that censors  free  speech, oppresses its citizens, routinely violates human rights and then denies all wrongdoing,  goes  against everything that Google,  and the rest of the free world  believes in.   It is about time someone stood up to them and I am glad Google had the clarity of conviction and the guts to do this.  More power to them and may this be the start of a worldwide movement that puts pressure on  the Chinese Government to revise their policies.

There is  another important aspect to this announcement : If  a $200 billion behemoth like Google,  run by some of  the smartest  engineers and security experts in the world can be breached by hackers in China,  it should be a wake-up call to the rest of the world on  the seriousness of the dire threat that hacking in general and China in particular poses.

Incidentally this attack occurs after several years of under-reported warnings in the press about this threat from China.    The country has secretly been building an army of Chinese hackers on a remote island off the coast of China - with the explicit goal of “electronic world domination” by 2050.  I had blogged about this threat back in April - which you can read here.