[chatmasta]

The implications are the same as when Google pulled out of China. That is, native Russian services will overtake US competitors, and with government backing, the US companies will be unable to respond or compete. This policy, while I suspect it will hurt Russia in the short term, will ultimately only benefit domestic Russian corporations while hurting American ones.

We saw this happen with Google/Baidu. Before Google pulled out of China, Baidu didn't stand a chance. Now, it's a global competitor. I wrote a final paper for my "next china" class in college, where my thesis was that the Great Firewall is economically beneficial for China. By inconveniencing Chinese users of foreign (read: American) services, it gives domestic competitors an inherent advantage. I argued that China doesn't actually care so much for the political reasoning behind the GFW, as everyone knows it can be trivially circumvented, but rather continues utilizing it because of the economic advantages it bestows on domestic corporations.

Baidu, Tencent, Alibaba, and other massive Chinese corporations built their businesses by copying the models of their American counterparts. The Chinese government gave them a huge advantage by subsidizing their development and crippling their US competitors. Now, these companies are on their way to controlling markets of the same size as their American competitors. It won't be long before Chinese companies are actually competing with American companies for American customers.

I suspect Russia, which is a country full of engineering talent (see: malware), will follow the same roadmap as China. That is: 1) cripple US internet businesses in Russia, 2) subsidize domestic competitors, 3) watch its own Internet companies take over the domestic market.

This move by the US government will have short term effects detrimental to Russian efficiency, but in the long term, Russia comes out on top in this scenario.

[jordanb]

Before Google pulled out of China, Baidu had 64% of the search market, that increased to 70% after Google's pullout.

Baidu had already won in China before Google's pullout. The pullout was just a PR move.

http://online.wsj.com/news/articles/SB1000142405274870399930...

[chatmasta]

Interesting. I had not seen that stat. Any idea how they were able to grow their market share so quickly? Obviously the government subsidies gave them the requisite funding, but what was making consumers choose Baidu over Google even before China started crippling Google?

[bsder]

Baidu would give you links to illegal downloads in the search results. Thus, everybody would use Baidu instead of Google.

[mike_hearn]

Not only that. They had an entire MP3 search engine!

There were also in the early years language issues, and coverage issues. Internet access in/out of China is absurdly, mind bendingly expensive, due partly to all the DPI hardware they insist sits at the border. This makes crawling China from outside very hard. Conversely it also makes crawling the rest of the internet from inside harder as well, but Chinese users mostly want local content so that's no big deal, necessarily.

China was tipping the playing field in lots of ways back then, there was lots of one-sided enforcement of very vague rules. It was pretty clear which way the winds were blowing there.

[slightlycuban]

> ...my thesis was that the Great Firewall is economically beneficial for China.

Not quite.

While protectionism can help bootstrap a domestic industry, shutting out competition doesn't always build an industry that can compete internationally. Worse yet, your industry might get involved in the political process and entrench its way of business.

Look at the Brazilian auto industry. About 50 years ago, Brazil passed import controls to boost the domestic auto industry. Today Brazil has one of the top 10 auto makers (can't remember which), and they export to...Argentina. Meanwhile Toyota--keeping in mind how big Toyota was 50 years ago--exports everywhere.

Building up the domestic market then moving to exports isn't a proven way to build up an industry. Being export-driven first, then focusing domestically is.

(I'm off topic from sanctions here, but there is a reason tariffs don't work)