Has Google Picked the Wrong Fights?

An article at CNBC.com notes that Google shares are on the verge of falling to a key technical support level, presaging a further decline in value of as much as six percent. Traders say the wonky share chart stems from Google’s decision to battle against three adversaries: China, Microsoft, and Steve Jobs’ Apple.

Well, if that’s the presumed chain of causation, I’m not buying it.

On the search front, Google has managed to hold off Microsoft without much difficulty, and it seems to be well placed to poach some, if not most, of Microsoft licensees of mobile operating systems. It also is strongly positioned against Microsoft in mobile search and advertising, while trying to encroach on Microsoft’s Office franchise with its cloud-based Google Apps.

On the whole, I’d say Microsoft has felt more pressure from Google than vice versa. That dynamic probably won’t change, at least in the near term.

Apple and Google do compete in the mobile space, with Google’s Android smartphone platform pitted against Apple’s iPhone powerhouse. Google is the upstart, and Apple is the acknowledged power; but anything Google derives form mobile will represent a relatively new revenue stream, and if it is successful in courting handset licensees for its Android operating system, its gains will come at Microsoft’s expense, not Apple’s. People generally make too much of the presumed Apple-versus-Google cage match in the mobile space. The fact is, the market is big enough and varied enough to accommodate both players.

Finally, there’s the China issue. Said Jon Najarian, co-founder of OptionMonster.com and TradeMonster.com:

“The decision to leave the China market is akin to ‘New Coke.’ They owned the search market and then they blinked.”

No, no, no, Jon. Windows Vista was the New Coke of operating systems, but I fail to see the aptness of the analogy for what happened with Google in China. That was a far more complicated situation, which I have covered at length previously.

What’s important to remember about Google in China is that Google wasn’t the market leader in that country, and it had little likelihood of ever becoming the leader. Revenue from China was a small part of Google’s business, and — despite the size of China’s Internet market — Google was unlikely to ever see search market share over there on anything approaching the same scale as what it achieves in North America, Europe, and most other jurisdictions.

China plays by different rules, and Google concluded that the country’s glittering market prize would always remain just out of reach, with China’s government tilting the table just enough to ensure that Chinese vendors would win the game while benefiting, in various ways, from Google’s continued presence in the country.

Google could have stayed, it could have carved out a measure of business in China. But the company concluded that the candle wasn’t worth the game, that the dangers and risks of continuing in China under the status quo (or worse) outweighed the likely benefits.

As hard as it might be for some people to get their heads around the idea, Google’s decision to leave China was a business decision at least as much as it was an ethical choice. Depending on what happens to other American technology companies who stay in China, we might well look back and say Google made the right decision, all things considered.

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