Last week the 21st Century China Program at IR/PS was pleased to host a public lecture featuring Charles Zhang. Hundreds gathered to listen to Mr. Zhang, the founder and CEO of one of China’s largest Internet tech companies, Sohu.com, and one of the founding fathers of China’s Internet. Sohu.com was launched in 1998 and has been a staple to Chinese netizens ever since. Much like Yahoo! in the United States, Sohu is an internet tech conglomerate with multiple branches involved in different sub-industries. Sohu also creates new software that can be used outside of its own internet platforms.
Mr. Zhang led the audience through the annals of Chinese Internet history, which he outlined in six phases: the portal years from 1997 to 2002, the search engine age from 2003 to 2005, the Blog era, the rise of online gaming, the social media phase, and the current the app era. However, the main event was his discussion of the ongoing Internet wars in China. An unassuming man with a fervor for brinkmanship, Mr. Zhang talked about Sohu’s wars, waged on battlefields of wire and bandwidth. He spoke energetically about how Sohu fights Internet piracy by holding companies such as Baidu (the dominant search engine in China) accountable to the law in a way that no other company in China is capable of doing. Sohu holds a distinct position as not only a tech company, but a search engine and media company as well. Therefore, it is specially positioned to operate independently of Baidu, and thus to withstand any attempt by the prominent search engine to lead traffic away from Sohu.
Mr. Zhang described a system in which Sohu was able to use the legal pathways in China to raise awareness of Baidu’s disregard for intellectual property laws, and thus to instigate government action. Sohu’s main motivation behind its fight against Web piracy was to protect its new TV streaming business model. The business model relied on buying streaming licenses for TV shows (including some American ones like Saturday Night Live and the Ellen DeGeneres Show), which would only be profitable were illegal streaming to be heavily mitigated. Thus, Sohu had to go after unlicensed streamers such as Youku and Tudou in order to make their model viable. According to Mr. Zhang, Sohu’s lawsuit against violating companies applied pressure on the government to enforce intellectual property rights. The government then began to arrest individuals and shut down companies that streamed illegal content and did not comply with legal standards. Regarding his crusade against piracy, Mr. Zhang declared “I don’t apologize, it’s good for society.”
Due to the flawed judicial system in China, where mechanisms for legal decisions vary widely and corruption runs rampant, media has become a new frontier for the rule of law and accountability. According to Mr. Zhang, Baidu threatened newspapers to prevent them from reporting on Baidu’s role in the piracy epidemic. Meanwhile, Sohu facilitated and promoted articles that illuminated the underbelly of piracy-complicit companies. The articles spread like wildfire and were shared widely on WeChat, a popular social media platform in China. Thus, Sohu under Charles Zhang’s control managed to do something the judicial system alone would have been incapable of doing; they held their competitors accountable to the law. Zhang described the media strategy by concluding “media is the public court [in China].”
At the conclusion of his talk, Mr. Zhang made the prediction that China’s Internet companies, not traditional industries, will soon dominate the Chinese economy. He explained that the intense competition between Internet companies makes them far more equipped to thrive in new markets, whereas China’s traditional industries will remain uncompetitive and therefore stagnant. Mr. Zhang’s predictions come at a critical moment in China’s economic development. In China, there is fierce debate about whether the government or the private sector should lead the next phase in China’s economic development. Charles Zhang made it clear that China’s battle-tested Internet companies are ready to lead the way.
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