Google Business Case Study

International Management

Why was Orkut so successful in Brazil? What caused the problems later?

The path to the internet opened up in Brazil in 1988. Commercial internet operations in Brazil, however, began in 1995 after the department of communications and the department of science and technology helped create private access provider through a decree. The access to the internet for the private citizens opened up with the privatization of telecommunications. The trend of internet use spread rapidly across the country and within a few years, Brazil had the third largest internet users among the Americas after the U.S. and Canada. The social media application that was made possible by the internet gained tremendous popularity in Brazil as they became more passionate about the internet and the social media applications.

As Orkut was launched in Brazil, it became very popular. Already internet-based blogs and photographs were a hit with the Brazilians and were hugely successful. Orkut was as if the next thing in the internet revolution in Brazil -- one that the Brazilians were waiting for. The two reasons for the instant popularity of Orkut have been identified since then. The first being that it was from the 'Google's stable' which was broadly appreciated and liked by the Brazilians. The second reasons being that like Gmail, Orkut was also based on the "invite only" format. Moreover, Brazilians were also accustomed with social networking site by then. For example, there was 'Friendster' that was being used by a section of Brazilians even though it was not that popular at that time. The reason that Brazilians were so addicted to social networking and community-based internet applications is the fact that Brazilians by nature are very community-based and liked to be associated with groups, say, researchers.

Later on, researchers have attributed a number of reasons for the tremendous popularity of Orkut in Brazil. The reasons range from the spelling of Orkut which was easy to pronounce and resembled a popular child drinks in Brazil called 'Yakult' to the color scheme that was used by Orkut which was the same as the Brazilian football World Cup team. The popularity of Orkut in the Brazilian society is evident from the fact that even popular songs were made with reference to Orkut that said: "I am going to delete you from mu Orkut." "

Crime and criminals using the Orkut stood out to be one of the main reasons for Google to ultimately shut down the social networking site in Brazil. Internet laws were not very well developed in the country when Orkut gained popularity. At the same time, Latin America became the safe haven for criminals -- especially drug traffickers, after extensive crackdowns in the U.S. and Europe. There were no policies for fighting crimes like pedophilia and racism happening over the internet. Brazilian Federal police noted at that time that 8 out of 10 hackers were from Brazil. Later on, Brazilian law was made that sought to prosecute hate speeches and did not give any immunity to internet companies for claims related to defamation.

Orkut became a virtual paradise for criminals as anti-socials formed communities on the social networking site and committed crimes like drug peddling selling Ecstasy and marijuana. There were membership-only groups set up by criminals on Orkut that were used to pitch and sell drugs. Around 2005, there were also allegations that pornographic images of children and adolescents were being widely distributed on Orkut. This out the company is a spot as there were cases filed in Brazilian court and the company asked to comply with court order to supply information about its users or close down business.

The financial aspect was also an issue for Google and Orkut which started off as a non-advertising site however Google decided to make some money through advertisements and allowed advertisements to be put on Orkut as a test case. However as soon as advertisements were placed there were repeated allegations that the advertisements were being placed beside objectionable pictures and posts. Thes forced Google to stop advertisements on Orkut worldwide and hence the attempt to monetize Orkut did not mature.

Experts blame the problems for Orkut and Google in Brazil was due to a lack of proper control on the process of subscription. There were many users who were below 18 years even though Google had specified the age. Hence, the problems for Google and Orkut in Brazil were a result of unchecked criminal activities using Orkut and the failed monetization attempt of the social networking site.

Essentially Google failed to understand the culture and the social norms, ethics and values of Brazil. It failed to anticipate how the society would react to certain situations like pornography and criminal activities being carried out using Orkut. The cultural difference between Orkut's home country the U.S. and Europe where it had been launched earlier, was not bridged by Google and it failed to formulate policies that could cater to bridge the gap between the cultural differences (Deresky, 1994).

When companies go global what characteristics of a country do they need to understand?

The impact on distance on various types of industries is easily assessed by the analysis of issues related to the cultural, administrative, geographic, and economic (CAGE) distance. This is also known as the CAGE framework (Deresky, 1994).

It becomes more difficult to enter and succeed in a foreign market if the differences between the two corresponding countries across these dimensions are huge or significantly large. The larger the difference the more difficult it would be to succeed in a foreign country. On the other hand, similarities suggest better chances of adaptability and thereby appropriate business strategies.

Cultural distance ( C) -- the differences between two cultures prevalent in two countries creates differences. Such cultural differences can be due to different languages, difference in ethnicity and the lack of connecting ethnic networks and values. Cultural differences also indicate differences in social networks. People following a different religion also create differences in lifestyle as well as differences in established social norms. Thus cultural differences with a partner country impact marketing of products with high linguistic content such as TV or websites, products that have national or cultural identities such as food products and products that carry some form of quality association like wines.

Administrative Distance (A) -- for bilateral business prospects administrative distance is caused by the absence of colonial ties and a shared monetary or political association. Government policies, political hostility or institutional weakness also impacts business in a foreign country.

Geographic Distance (G) -- physical remoteness and the lack of a common border increase the troubles for doing business overseas. Other geographical challenges include the absence or lack of sea or river access, the size of a country, weak transportation links and communication infrastructure and differences in climatic conditions (Deresky, 1994).

Economic Distance (E) -- this difference usually refers to the economic condition of a country and is judged by the differences in the income of consumers. The differences in economic conditions result in differences in costs and quality of products. The economic difference can develop due to lack or abundance of natural resources, financial resources as well as human resources. Business is impacted by the costs and the quality of all the three as well as other issues like quality of infrastructure, intermediate inputs, and information or knowledge. Demands for various products differ according to the distance between the two economies of the two countries.

A good example is Google which has been suffering due to the administrative difference in its business in China where the political regime supports censorship of media. Google in Russia suffered due to language differences as Russians are not known to be good English speakers. Google also took a toll due to the economic distance between Russia and Google's home market the U.S. In Russia, the lack of infrastructure for payments has created a handicap. Google has also been affected by the geographic distance of both Russia and China and has had to set up offices in both the countries (Deresky, 1994).

Thus, it can be concluded that the local culture, the administrative setup, the economic condition and the geographic makeup of a country are the factors that need to be deliberated by managers before companies can set up business in a new country.

Why did Google refuse to handover Orkut's user data?

Tavares, a professor at the Catholic University of Salvador noted the illegal activities on Orkut happening in Brazil as he had been given the grant to monitor human right violations on the internet. Complaints started flowing into the website of SaferNet -- an NGO created in 2005 for the purpose of tracking human rights violations on the net. Though Tavares tried to get in touch with the Google authorities he was unsuccessful.

Civil and criminal proceedings were filed against Orkut and Google as the company had not responded. Google was charged with acquisitions of protecting criminals under a criminal lawsuit apart for a civil lawsuit as well in 2006. The court ordered Google to provide the Internet Protocol or IP information and registration details of all the users of Orkut who were suspected of being engaged in illegal activities including drug trafficking, racism, and pedophile.

But Google declined to hand over any part of the data that it had with itself from the users of Orkut. The reasons for Google was that since it was based in the U.S. and the data was stored in huge servers based in the U.S., the company was not bound to comply with the Brazilian court orders but rather they were under the U.S. law and not under Brazilian law. At that time, the U.S. internet laws were very strict and prevented handing over of any form of data collected by internet companies to third parties keeping in mind the security of the users. The U.S. recognized such data as private data belonging to the users and the internet companies had no right to hand over the data to anyone else or even to use the data for any other purpose but for the purpose they were collected without the user's consent. Google also said that such handing over of data was only possible if the company was directed by any U.S. judge.

Moreover, Google argued that some of the crimes enlisted in Brazil against Google such as racist speeches were not recognized in the U.S. and its constitution only allowed prosecution of hate crimes but there was no legal provision to prosecute hate speeches. There were, however, threats from Tavares that if Google did not comply with the Brazilian law, its business in the country could be threatened.

These were the reasons that Google put forward as its argument in not handing over the data to Orkut users suspected to have committed crimes.

How should Internet companies and particularly those with social networking sites decide whether to share user information with the legal authorities or not?

Internet companies and those that have or run social networking sites are often faced with the dilemma of whether to share information and data about its users with legal authorities. This is what Google faced in Brazil where it was almost placed with a choice between providing data to the legal authorities and the court following the court order or to have its business in the country impacted by the issue.

A very recent case that has got the attention of the media and the world is the case between the IT giant Apple and the U.S. federal investigators. The federal investigators asked Apple to give the lock codes to open an iPhone used by a shooter accused of multiple killings. The investigators believe that a lot of information can be gathered from the smartphone of the accused which could nail the culprit further. However, Apple refused to part with any data to about the user even if the user is an accused. Apple cited the strong data protection laws in the U.S. which prevented it from handing over data of the users. The company also said that the handing over of data to the user would become a precedent for more such incidents to follow. The matter between Apple and the U.S. federal investigators is in court and is being decided over.