Google's Great Wall of Social Networking

Social networking may be what is ailing Google (Nasdaq: GOOG) domestically, but it appears to be the recipe for success in China.

Google's Kai-Fu Lee -- ceremoniously lifted from Microsoft's (Nasdaq: MSFT) roster to help run Google's operations in China -- told a Dow Jones reporter that Google is exploring investment opportunities in social networking and mobile Internet in China.

This has to be some form of diabolical trap, right? Tell me that Lee is only saying this in the hopes that a fledgling rival will dive headfirst into these thorny niches under the assumption that Google is serious.

Companies trying to cash in by pushing content to China's handset users have met hard realities. Between the Chinese government cracking down on wireless commercialization and the mobile giants wanting bigger roles in the platforms they provide, it's a barren growth area. Just last month, Focus Media (Nasdaq: FMCN) warned that a rule change would be enough to shave off almost 75% of the revenue that the ad giant had projected it would generate in that niche this year. Thankfully, mobile advertising was set to account for just 6% of the company's overall revenue mix. Things have gone worse for specialists like Tom Online and KongZhong (Nasdaq: KONG) that have hitched their wagons to that rocky post.

And social networking? Please. Google itself warned that the difficulty in monetizing social networking domestically through sites like MySpace and its own Orkut helped pinch profits during the fourth quarter. What makes Google feel that it will be any better in China?

Lee points out that China's typical Internet user is a youthful 25 years old, compared to the stateside average of 40 years of age. Social networking is an appealing endeavor for that age group. However, if social networking users are tough leads for marketers outside of China, how will that play out in a country where per capita income is still low and piracy runs rampant?

Record labels are going after search engines Baidu (Nasdaq: BIDU) and Sohu (Nasdaq: SOHU) because they are havens for kids looking for pirated MP3 song files. Does Google really want a piece of that?

I'll believe it when I see it. Google can't win. A clean site won't be popular. A dirty site will invite lawsuits. In the meantime, I'll just cling to my theory that Lee is just saying this so a company like Baidu -- which commands more than twice the search-engine traffic of Google in China -- will bite the hook. Unfortunately for Google, Baidu isn't stupid. You can't be dumb if you're whipping Google in a game that Google typically dominates.

Networked Foolishness:

• Baidu and Google Have Company in China
• Google Increases Chinese Outposts
• Little G in Big China