The Real Reason Google Must Leave China

When Google (Nasdaq: GOOG  ) agreed to censor its search results in China in order to comply with stifling local regulations, some said that the company had finally turned evil. Now Google is threatening to pull out of China because of human-rights problems -- and the critics are essentially calling Google stupid for risking a lucrative market.

So is Google evil or stupid? Naysayers can't have it both ways.

The reality is that Google is worth nothing without its users. Stop clicking on Google's ads, and the money is gone. If Google were to lose the trust of the general public, for whatever silly reason, the cash cow would run out of milk very quickly as Google users flocked en masse to Baidu (Nasdaq: BIDU  ) , Microsoft's (Nasdaq: MSFT  ) Bing, Yahoo! (Nasdaq: YHOO  ) Search, InterActiveCorp's (Nasdaq: IACI  ) Ask.com, and other search providers.

Google isn't the only game in Cybertown, and the company relies on its brand name much the same way that Coca-Cola (NYSE: KO  ) and Apple (Nasdaq: AAPL  ) do. I personally use Google every day, even if the search results aren't materially different from or better than the competition. But I'd be gone in a heartbeat if I thought I was supporting some heinous cause, and so would you. How many people do you know who have sworn off Citgo gas or Nestle baby formula?

For these reasons, quite besides its whole corporate mission and "don't be evil" public stance, Google can't afford to be evil or stupid. The company has to walk a fine line in tricky situations like the Chinese dilemma. It made sense to agree to Chinese demands for a while because of the immense promise of that market. But taking a firm position against inhumane and unethical practices like persecuting human-rights activists through cyberspace is the only option that makes any sense for Google now.

Stop crying about the opportunity cost of losing the Chinese market. Google would lose far more if it didn't stick to its principled guns, now that push has come to shove. One can only hope that the Chinese government will buckle under the international scrutiny brought on by this brouhaha, but I'm not holding my breath.

Fool contributor Anders Bylund owns shares in Coke and Google, but he holds no other position in any of the companies discussed here. While he's not holding his breath, Anders is perfectly happy holding his Google shares for the long haul. Coca-Cola and Microsoft are Motley Fool Inside Value recommendations. Baidu and Google are Motley Fool Rule Breakers picks. Apple is a Motley Fool Stock Advisor selection. Coca-Cola is a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2010, at 12:45 PM, TMFMitten wrote:

    Part of my personal goal as a socially responsible investor is to avoid, as much as possible, governments that oppose human rights and political liberty. If an item at the store says "Made in China," we don't buy it. And you'd be amazed at just how much IS made in China, if you stop to look.

    I'm glad to see that a big, powerful company is finally holding the Chinese government's feet to the fire, rather than caving in to them. It's about time. Maybe this will bring some much-needed attention to what's going on in China. Take a quick look at Amnesty International's ongoing reports, or what the International Campaign for Tibet has to say, or the Falun Dafa Information Center. It's not pretty, and it doesn't seem to be improving.

    Capitalizing on an emerging market is one thing, but making deals with a brutal, oppressive Communist regime is quite another. Somebody has to stand up and put principles ahead of profits.

  • Report this Comment On January 14, 2010, at 4:37 PM, daniinLA wrote:

    This is probably a stupid question but -- with opportunities in China fraught with peril, why isn't anyone talking about search engine prospects in India? Is there no market or is the market already saturated? With the highest % cell phones, you'd think that search engines which were cell oriented (I use google on my iphone all the time) would do well? Isn't India the #2 emerging economy?

  • Report this Comment On January 14, 2010, at 4:38 PM, maniehols wrote:

    Google has no choice but to pull out of China. I believe the free world would react in a very positive way and Google should not hesitate.

  • Report this Comment On January 14, 2010, at 4:47 PM, Fool wrote:

    Haha. The western mind never reaches beyond ideology or religious beliefs. Trying to change a country with even trying to understand it is a ridiculous thing. This is what costs 4m less population in Iraq and endless terrorist in middle east.

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