China or the world? That's the question before you in this week's duel. Rick Munarriz says you should buy Baidu (NASDAQ:BIDU). I prefer Google (NASDAQ:GOOG).

There's a lot to like about Baidu. First, Google has been unable to gain traction in Baidu's home market of China. Second, Baidu operates in one of the world's most vibrant emerging economies. Third, it produces excellent returns on equity and capital. Fourth, cash flows freely though the business and into its coffers.

Baidu is a great business. But compared to Google, it's limited. And that's why I'll take the Big G in this debate.

A bigger back yard
Baidu's problem is one part geography and one part technology. First, geography: A full 100% of Baidu's revenue comes from the People's Republic of China. As goes China's economy, so goes Baidu.

Google doesn't have this problem. Less than half of the Big G's 2008 revenue originated in the United States, while more than 80% of its assets were based here. The benefit? Even as the U.S. economy suffered a steep decline, Google continued to grow.

Baidu resembles Brazil's MercadoLibre (NASDAQ:MELI) and India's Rediff (NASDAQ:REDF), since all three are regional specialists. But they aren't perfectly equivalent. MercadoLibre is the eBay (NASDAQ:EBAY) of its region, a fast grower with multibagger potential. Rediff, by contrast, has been a disappointment.

So far, Baidu has been more like MercadoLibre than Rediff, but that could change if China's economic winds begin to blow cold.

Catch a Wave with Google
Here in the U.S., we're only now beginning to see signs of recovery. Google is controlling costs, appeasing employees, and investing cautiously, even as debate rages over whether the Big G is destroying newspaper companies such as Gannett (NYSE:GCI).

Where it is investing, Google's finding success. Consider Wave. This in-development, open-source project wowed crowds at the company's annual I/O developer conference in Silicon Valley, promising to combine email, instant messaging, social media, and document-sharing into a series of real-time digital conversations.

In a sense, Wave is a marketer's dream -- Twitter 2.0, if you will -- because it follows what users are talking about and doing, in real time, in a very rich way.

Intruding on those conversations via advertising would have to be handled with extreme care, of course. But the more Google knows about you, the more credibility it has as an advertising platform. Wave could become a user-friendly way for Google to capture a greater chunk of the global advertising budget.

But that's longer-term. Here and now, Google this week took the wrench to its Apps platform to make it work with Microsoft's (NASDAQ:MSFT) Outlook software, and with good reason. Users get to keep using familiar software (i.e., Outlook) while Google cashes in on its vision for cloud-computing software.

Google is doing well in the cloud, in part because it's a trusted brand. Microsoft's new search engine knows that only too well. In early tests, Bing users scored results highest when they were disguised as coming from Google.

Relative growth, stunted
Finally, let's talk about the future. With Google, we know that cloud computing will fuel future growth -- perhaps enough growth to create the world's first trillion-dollar business.

Baidu's will come from a more Web-literate China. That should yield high growth for the next several years, but then what? What is Baidu's cloud-computing-sized opportunity? If you can't answer that, don't worry. Rick can't, either.

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Baidu, Google, and MercadoLibre are Rule Breakers recommendations. Microsoft and eBay are Inside Value picks. eBay is also a Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has never, ever worn googly-eyed glasses. Well, OK, just once.