Google Secrets

Google looks ready to deal if its market position is threatened. When it put up $1 billion for 5% of AOL in December, the deal helped expand the companies' online advertising alliance but also kept Microsoft from moving in. Google may not have the look of a serial acquirer, but it will likely do more and larger deals. "They still don't have stickiness," contends Ian Campbell, CEO of research firm Nucleus Research, citing the hit-and-run nature of search.

What might a blockbuster deal look like? A content-delivery company in another medium, such as satellite radio or cable TV? A VoIP or other tech-based service provider? Or with Disney buying Pixar, giving Apple CEO Steve Jobs new entry to a content provider, does Google need to buy closer ties to a content provider?

Google shouldn't bank on out-innovating everyone, Campbell says. "Microsoft has yet to take advantage and give Google a run for its money," he says. But Microsoft is an example of a company that kept its culture, made tactical acquisitions, enjoyed runaway success, and grew without being tempted into the megadeal. --Tony Kontzer

What does 'Don't be evil' look like in China?

Google's approach to China looks a lot less secretive after last week. The company said it will follow government rules to censor certain information, in return for being allowed to offer a Google.cn Web search site in the country. And it won't offer blog or E-mail services in China, fearing the government would ask it to turn over personal information. Yahoo and Microsoft offer those services, and the government has forced them into embarrassing disclosures.

But last week's decision only starts to answer one of Google's toughest questions: How will Google translate its mission and values to fit in foreign markets?

Google is catching flak for cooperating with the government. "The tricky question is, what's the gray area between obey or stay out?" says John Palfrey, executive director for Harvard's Berkman Center for Internet and Society. Governments lay down standards, like "no subversive content," and leave so much to interpretation that companies err on the side of censoring, so as not to risk being shut down, he says. So, the real test is how close Google or others come to crossing the line.

Microsoft caught heat recently for taking down a Weblog posted on MSN China. But at least that blogger had the chance to offend.

It raises the question of whether the leading search engines will differentiate themselves based on their information policies in totalitarian regimes. "It will tell you a lot about these companies," Palfrey says.

The world needs U.S. companies mixing it up in the gray areas of restricted regimes and emerging markets. No company is perfect, but Google has done a whole lot right to earn the Web community's trust. China needs the Google it can get, for now. Seems like we'd be better off having Google slogging knee deep in the gray areas, risking getting its pants muddied, rather than sitting it out and keeping pristine clean. --Chris Murphy

Illustrations by Peter Hoey