Looks like my post earlier today on this subject attracted the attention of some real life CSR experts (well, at least one). Rich Brubaker, who blogs about China CSR and other subjects at All Roads Lead to China,  has a mammoth post on the subject of Google, its motivations, the conventional wisdom on the matter, etc.

Before looking at that, however, I need to respond to Rich’s comment to my post, since he challenged a few things I wrote about. Let’s take a look sequentially:

1. I want to challenge you on the idea that it was a short term bad business decision. Reason I say that is that their revenues in China were not really China based.  Yes, they were booked here, but the market for those eye balls was overseas… it was not Coke trying to get local clickthroughs.

I guess the answer to this question is partially about timing. I’ll admit that I am not too familiar with Google’s China customer base. 

However, even if their customers are all foreign companies that are not all that interested in the local market, I would think there are some repercussions for not being able to book these sales in the PRC, and those have to be negative. Maybe there will not be a huge loss of revenue, but I would be surprised if there isn’t a loss at all.

2. What about the percentage of global revenues (the other 98%) that would have disappeared had they not pulled out?  How much of their short term cash flow was at risk should Google remained in China, and then found their core compromised?

I can’t go along with this one. Two things. First, where are the offsetting gains (assuming losses I asserted above)? Yes, Google is getting some very nice press overseas these days, but will that turn into real business? Perhaps, but I’m not sure if there is a solid connection there. It’s speculative at best.

Second, was there really a danger of Google taking a nosedive by staying in China? Honestly, I haven’t read anything about that. From what I hear, they weren’t going gangbusters over here, but neither were they losing money. Was their core really being compromised (I assume you are talking about their values)? Sergey Brin certainly thinks so, but was this a view widely held by the public, and if so, did this translate into a drop in revenue?

I don’t see why Google couldn’t have kept on going here without any serious problems, competition notwithstanding.

3. With regard to the news that Tom and China Mobile (or was it Unicom) were walking away, let them.  Both of those groups will likely offering up the nationalistic PR angle and will soon realize that their consumers drove them to Google in the first place for a reason… and if all they lose are those, and perhaps a few more, then they are still ahead of Tiger’s sponsorship loses.. loses I am sure will partly be offset by customers who walk away from Microsoft and yahoo in other markets.

OK, I like the Tiger reference, and sure, the moves by PRC partners were made for nationalistic toadying reasons. Probably makes sense for them, although kicking a guy when he’s down sucks.

Frankly I don’t know how to score the repercussions of those deals since I don’t know a lot about them. I don’t know how profitable these partnerships were supposed to be, what Google’s costs would be, the risk involved, etc. If they made the usual deal that everyone makes with China Mobile or Unicom, it probably wasn’t all that great (lesson: it’s good to be a (near) monopolist, something I guess Google already knows). So you might be spot on with that assertion. I’d like to think, however, that they were anticipating some profits, and that without these partnerships, they are looking at some kind of loss.

To sum up, I understand that Rich is making the case for a sound business decision here. Fair enough, and I realize after reading the All Roads post why Rich is saying this, and of course the conventional wisdom is not covered in glory here.

Back to my original post, though, the latitude given to execs and Boards when making “business decisions” is vast, and it is definitely the case that Google’s pullout here falls within that discretion. However, the case does make me wonder what will happen in the future when a clear-cut case of moral principles trumping profits pits shareholders against the folks running a company. Bound to happen at some point.

Briefly on Rich’s All Roads post. Since I’ve already yakked too much here, just go read it yourself, it’s long but worth the read. Anyway, it’s the weekend. Sit down and do more than skim, you have the time.

I particularly enjoyed how Rich smacks around the buffoons at CNBC, who really did embarrass themselves in an interview the other day of Dan Harris (Harris & Moure/China Law Blog) and Dan Griswold (Cato Institute, staunch free trader). The interviewees came across as intelligent, knowledgeable adults, as you’d expect with these pros, while the show hosts acted like ignorant, petulant children who obviously were not prepared for the topic at hand. Hilarious stuff.

Rich’s main point is that the conventional wisdom, which says that Google made a huge mistake turning its back on a vast market like China, is not necessarily true. I agree, which is why I wrote in my post about a short-term loss. I have no idea what would have happened to Google here in the future if they had stayed. If only I can get him to agree with me that there will probably be some sort of short-term dropoff . . .