This is a complex topic. Would Google be pulling out if it was on track to make more than $300 million a year or if $300 million wasn't only 1.5% of its revenues, or if the rest of Google wasn't growing at ~17% a year ? Hell no. Does this move buy a ton of PR and credibility for Google's "don't be evil" mantra, which hadn't been faring so well ? Hell yes. But I find it interesting that the US State Department comes out quickly with a statement saying "Basically, we support and agree with this action that a company has taken against a sovereign government". You don't see that every day. Also, I find it to be a very interesting question if a modern multinational company has any real right to demand change from a sovereign government. My thinking is that sure, you can ask for it, but you damn sure can't demand it, given that whole sovereignty thing. Looking at it skeptically, I will be very disappointed if this all turns out to be PR spin and negotiatons and I see the headline "Google and China work out compromise, Google to stay in China" in a few weeks. I also wonder if more intellectual property companies might not try this approach. If you're moving atoms, China is a great place to be these days. However, if you're moving bits, then China is still the risky Wild West, and it may be a better business call to back off and let the market establish some rules and cut down on the whole rampant intellectual property theft and active state / corporate espionage factors that are part of doing business in China today.
That aspect is especially interesting in light of the common knowledge that the government, particularly Obama Antitrust Chief Christine Varney, has been keeping a veeeeeeery keen eye on Google. To say that the government is calling in the dogs on Google would be an overstatement...but if they did, it wouldn't surprise anyone. For the past year or so, there's been extended talk in business journalism circles (think Barrons, WSJ, The Economist, The Atlantic) and whether Google is in danger of prosecution under antitrust statutes, what it might look like/what the merits would be, and whether Google might end up in a similar position to Microsoft a decade ago. I'm not saying that Google is doing this to please Washington or to curry favor with the Obama administration. But it probably didn't hurt. I'm not sure about this. At least implicit in some of the articles linked so far has been the idea that there is a tradeoff between customers in China and their Western customers. Frankly, a lot of people don't like a corporation, particularly one of Google's supposed ethos, dealing with the Chinese government, especially in light of Tibet and otehr human rights issues. What if there was a boycott? Or a sort of 'soft' boycott, where concerned individuals just took their business elsewhere? A heavy part of what Google is probably looking at is, "How many customers/dollar in the West does one customer/dollar in China make us lose?" If the answer is 1.2 Western dollars for every Chinese dollar, it's a dumb idea to continue in China. If it's 0.2 Western dollars, not so dumb. So I'm not saying anything definitive one way or the other, but Google may be hoping to make money by pulling out of China.