ERIC SCHMIDT BELIEVES INTERNET WILL SPLIT

googleFormer Google CEO Eric Schmidt spoke to a private event who he believes that the internet will be bifurcated into one led by China and one led by America. He is justified by the control and censorship that exists in China as the driving force.

“I think the most likely scenario now is not a splintering, but rather a bifurcation into a Chinese-led internet and a non-Chinese internet led by America.

If you look at China, and I was just there, the scale of the companies that are being built, the services being built, the wealth that is being created is phenomenal. Chinese Internet is a greater percentage of the GDP of China, which is a big number, than the same percentage of the US, which is also a big number.

If you think of China as like ‘Oh yeah, they’re good with the Internet,’ you’re missing the point. Globalization means that they get to play too. I think you’re going to see fantastic leadership in products and services from China. There’s a real danger that along with those products and services comes a different leadership regime from government, with censorship, controls, etc.

Look at the way BRI works – their Belt and Road Initiative, which involves 60-ish countries – it’s perfectly possible those countries will begin to take on the infrastructure that China has with some loss of freedom.”

China has managed to see Tencent and other media companies emerge into major corporate titans.

Google has begun working to develop a different class search engine for the chinese market that considers the legal requirements. Schmidt is aware of this work which probably is why he believes the bifurcation is inevitable.

Media is a bigger chunk of the GDP in China that it is in the US or EU. This will change over time as the economy matures but it will be decades before China can finish modernizing.

In a separate discussion last night between Schmidt and several start-up founders, he lauded Chinese tech products, services and adoption, especially in mobile payments. Customers at Starbucks order with an app and pick up their coffee, there is no register like there are in US and EU restaurants.

Mobile payments in the US and EU are comparatively small but growth in lower cost mobile phones is making more mobile possible. Cheap phones are not brisk sellers as most perceive them to be too limited.

Gaming in China is still a small part of the economy but we suspect that with the growth in television and movies that games cannot be far off.

Tencent has been the most active in gaming but approval for new games has been slow in recent months due to a management shakeup in China’s government. Once this is stabilized it should allow Tencent to continue to publish new games.

The vere popular Korean MMO Blade and Soul was brought to the chinese market by Tencent.