Can Google shareholders gain from the China confrontation?

It’s hard to see exit from the Chinese market as maximizing Google’s profits. China is, after all, very large (though Chinese growth in searching is slow).

It may be that Google is being, at least in part, high-minded. After all, it’s motto is “Don’t be evil” & it is reported that Sergey Brin’s aversion to totalitarian states played a role here. Yet, it is not Google’s fiduciary duty to be high-minded: rather the organization must act in its shareholder’s interests.

But there are two points to be made in favour of Google’s China stance:

First, Google was getting clobbered in the Chinese market & so perhaps it is giving up less than one might think, & China wasn’t a significant part of its business anyway.

Second, Google makes its money by figuring out exactly what we’re interested in and then selling the ability to target ads aimed at us. For that to work well requires us to provide Google with a great deal of personal information, and we are all the more likely to do that if we trust Google.

Google, then, may have decided that fighting to protect our privacy, and to be seen to be doing so, might have immediate negative consequences for its bottom line, but might pay off in the long run. This seems to be born out by the latest detective work Google has undertaken to protect those who protest a Chinese mine in Vietnam.

Perhaps then, and only perhaps, a case can be made that Google’s China confrontation will bring sufficiently material long-term benefits to justify any short term costs.

3 thoughts on “Can Google shareholders gain from the China confrontation?

  1. “Yet, it is not Google’s fiduciary duty to be high-minded: rather the organization must act in its shareholder’s interests.”

    Well, yes. But these interests are not confined to profits and dividents. I remember Shell shareholders forcing the management not to dump their platform in the ocean. I would think the management can read what shareholders will and will not approve of… Or perhaps tolerate…

    Broadly speaking, I think CEOs usually have quite a bit of discretion on such matters. Within reason.

  2. You’re neglecting the WSJ story, repeated by Bolt, that Sergey Brin fled an authoritarian regime and this played a big part in in the decision.

    The lack of praise for Google around the internet for a principled decision is really disturbing.

    Also, getting out of a relationship like this, entwined with a wealthy dictatorship, because you can’t stomach their ways of operating, can’t be bad in the long run. It will protect their long term brand. On the other hand, being in bed with such a regime can have risks for your brand in as-yet unforeseeable ways, especially if that regime weakens in power down the road.

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