Google in China

  • Posted by
  • on January 13th, 2010

Right now I don’t have much more to add to the discussion of Google’s decision to no longer play by the PRC’s rules, and all the implications that decision may have for many US firms in China. When the dust settles I will try to write something intelligent. In the meantime, without intending to be too “I told you so”, here is a post from my previous blog that I wrote almost exactly four years ago. Thanks to the Internet Wayback machine.

Does China Really Matter For Google?

I am guessing that Google will be happy if they can generate $30M in revenue in China in 2006. Baidu, the market leader, is projected to generate somewhere between $65-70M in revenue in 2006. I believe Google is expected to generate over $8B in revenue worldwide in 2006. If my math is anywhere in the ballpark, China will account for LESS THAN 2 DAYS of Google’s 2006 revenue. And given the economics of the keyword value chain in China, that revenue should be significantly lower margin revenue than is US revenue. So if the China business went away, would investors care?

No question there is value in setting up an R&D center in China; China has some of the best engineers in the world, and Google can probably hire anyone they set their sights on.

But does the China business really matter for Google, and will it ever? And is it worth the potential damage they may be doing to their brand, deserved or not (I believe not), over their decisions regarding

And as a foreign Internet company in China, are they doomed to fail anyway?

Fast forward four years today, and ironically Yahoo, once excoriated by Congress for its operations in China, looks, after its deal with Jack ma that gives it 35-40% of the Alibaba Group, much smarter, or much wiser, than Google, at least in terms of finding a positive exit from China for its shareholders. (Kara Swisher of All Things Digital disagrees.)  Yahoo may end up making the most money of all the US Internet firms who have invested in China. Jack Ma on the other hand may be probably kicking himself for selling so much to Yahoo.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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