Google's China Syndrome

[Commentary] What seems like a revolutionary departure from your father's capitalism is, in fact, just another spin cycle in the machine of creative destruction.

Google's business model takes the rich, voluminous private information in search or email and creates the most profitable audiences on the planet. Advertisers flock. But what they bid to buy depends critically on banker's trust.

The extraordinary success of the search giant, now valued at about $190 billion and accounting for over two-thirds of global net searches, operates in the shadow of its virtual plaque: Don't Be Evil. Only when customers believe that slogan will the company's audiences - and revenues - be secure. This vault is more important than the bank's. Dollars stolen can be insured and replaced. Confidentiality breeched cannot be restored.

Which takes us to China and its frontal threat to Don't Be Evil. Markets are not always conquered as easily as with the construction of a better database or an ad-free Search Page. The Chinese Government does not endorse free speech, and asserts sovereignty over Internet content. By establishing a physical presence in the country, with Google.cn in 2006, the company conceded a compromise. Google.cn searches were censored, and Google cooperated in the effort. Better to communicate some information to China's citizens than none at all.

Confusion reigns over tactics and motives. Google is an extraordinary entrepreneurial foray, nested in profit and loss. Many, even Ken Auletta, in his insight-filled biography of Google, misconstrue the nature of their incentives. Google's founders, who viscerally disdained web advertising as an assault on the user, came to embrace it when the market showed them the money. This sex change operation was driven by practicality, the search for a funding mechanism. This is benign to Auletta, contrasting it with the "crass commercialism" of Bill Gates' dream for a computer on every desk. Mr. Gates of World's Greatest Philanthropist fame? Google's withdrawal from China is a tack to keep their search engine open and their database closed. Their corporate soul merits protection. It is a metaphysical construct that has cash value. Supporting it is not selling-out - it's just selling. And that's a good thing. Trust me.