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Tuesday, March 23, 2010

Cramer is wrong on GOOG

Cramer guesstimates that Google lost a potential $5B of China's Internet advertising dollars (expected to grow from 3-4B to 15-20B) in future revenue because it is 'out' of China. (video)

He is just wrong.

Google is not out of China. People can still search via Google in China, except their servers are in Hong Kong now, not mainland China. Google is still servicing a market. (article) Granted their Hong Kong based site can be blocked at anytime, like YouTube and Facebook are, but from all media accounts that I have been reading, this is not the case. In fact the only thing that I can see happening is that certain searches produce 'error messages'.

Based on this, I do not see how this is such a big deal. The hick up for GOOG will be the ad-network they developed in China which is seeking alternatives, and will unquestionably dent their progress there. I have also seen reports of the mobile companies halting the distribution of Android phones, which really only hurts the Chinese consumer, but dents the future earnings power of Google by not benefiting from the mobile web.

This entire event is a very real short-term mess for Google (and China). No question about it. The stock is correct to sell off. But Google is by no means completely isolated from the Chinese web market. That is just not true.

I repeat my thesis. Let people like Cramer keep being pseudo negativity (so he can be neither right or wrong), and as the stock gets oversold and the dust settles, this whole issue will become a non-event for Google.

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