Much has been made of the news that Kai-Fu Lee has left Google China to start his own venture to capitalize more directly and more personally on the massive opportunity there.
Like most Western firms Google is positioned there and will use all resources possible to ensure that it gets a good share of that market.Â However at the current 20-30% share it’s a far cry from what Google enjoys in the US.
Turning to Europe the story seems to be anti-trust related but it’s much more personal than that.Â The network operators and the governments in Europe realize that they are sending billions of dollars overseas to Google.Â As they see the need to continue to make large investments in infrastructure for network access and online services the pressure is mounting to do something about the “free ride” that Google is getting.Â A $20B number is being used notionally to indicate how much money the European economy would lose if it didn’t do something to avert the continued funds flow from Europe to Google.
It’s possible for the network providers and governments of Europe to make life very difficult for Google and to effectively block access to data and services that would make the ability for Google to target ads more difficult, especially for local and regional advertising which is a large portion of the market.
Google is probably smart enough to realize that it will be better off coming up with a scheme to share revenues with key network service providers that will be used to help fund needed investments in capacity and processing.Â It’s possible that this may represent a significant cost to Google over the long term.Â On the flip side if they do not it’s more likely than not that service providers will pool their still-considerable if often somewhat uninformed resources together to shield some key opportunities from Google.
Up until now Google has had a fairly free run in capturing new markets and additional share.Â Â It appears that the resistance is at least beginning to stiffen and depending on how it develops could represent some real challenges to Google ambitions beyond the U.S.
[Disclosure: Research 2.0 has no investment position in Google, long or short, at the time of this writing.]