TripAdvisor shares drop following China app ban

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The Cyberspace Administration of China (CAC) announced it has banned 105 mobile apps for violating Chinese internet regulations. While almost all of the apps are made by Chinese developers, American travel booking and review site TripAdvisor is also on the list.

TripAdvisor  shares dipped on Nasdaq after the CAC’s announcement, but began recovering in after-hours trading.

While TripAdvisor is based in the United States, like other foreign tech companies, it struck a partnership with a local tech company for its Chinese operations. In TripAdvisor’s case, it entered into an agreement with Trip.com — the Nasdaq-listed Chinese travel titan formerly known as Ctrip — in November 2019 to operate a joint venture called TripAdvisor China. The deal made Trip.com subsidiary Ctrip Investment a majority shareholder in the JV, with TripAdvisor owning 40%.

As part of the deal, TripAdvisor agreed to share content with Trip.com brands, including Chinese travel platforms Ctrip and Qunar, which gained access to the American firm’s abundant overseas travel reviews. That put TripAdvisor in a race with regional players, including Alibaba-backed Qyer and Hong Kong-based Klook, to capture China’s increasingly affluent and savvy outbound tourists.

The CAC is the government agency in charge of overseeing internet regulations and censorship. In a brief statement, the bureau said it began taking action on November 5 to “clean up” China’s internet by removing apps that broke regulations. The 105 apps constituted the first group to be banned, and were targeted after users reported illegal activity or content, the agency said.

Though the CAC did not specify exactly what each app was banned for, the list of illegal activities included spreading pornography, incitements to violence or terrorism, fraud or gambling and prostitution.

In addition, eight app stores were taken down for not complying with review regulations or allowing the download of illegal content.

Such “app cleansing” takes place periodically in China where the government has a stranglehold on information flows. Internet services in China, especially those involving user-generated content, normally rely on armies of censors or filtering software to ensure their content is in line with government guidelines.

The Chinese internet is evolving so rapidly that regulations sometimes fall behind the development of industry players, so the authorities are constantly closing gaps. Apps and services could be pulled because regulators realize they are lacking essential government permits, or they might have published illegal or politically sensitive information.

Foreign tech firms operating in China often find themselves walking a fine line between the “internet freedom” celebrated in the West and adherence to Beijing’s requirements. The likes of Bing.com, LinkedIn, and Apple — the few remaining Western tech giants in China — have all drawn criticism for caving to China’s censorship pressure in the past.

Source: Techcrunch