Google Tightens Its Grip on Emerging Markets

(MoneyWatch)  So much of the news about the U.S. media industry is about short-term trends and emergencies that significant indicators about future growth opportunities are often overlooked.

Meanwhile, the lines are being drawn for for a series of Battle of the Titans that will have repercussions in various sectors for years.

Take eBooks, for example. It's become clear in recent days that Google intends to start selling eBooks later this year, which of course places the search giant in direct competition with Amazon. And, while there seems to be a general assumption inside the U.S. that domestic consumers will lead the adoption of eBooks, some observers point to alternative scenarios.

One posited recently by ZDNet's Larry Dignan cites a Forrester report and outlinines the following time line for eBook adoption:

• 2007-2009: E-reader adoption is driven by early adopters.
• 2009-2011: More mainstream consumers buy e-readers and the $199 price point is breached.
• 2011 +: Video and color appear and the $99 price point becomes reality.

But, here's the kicker from that report: "The key element player in the market--and driving down the price will be China. Consider the textbook tipping point. [It] won't come from Harvard, MIT, or even Stanford. We think it will come from developing nations like China and India, whose universities will use technology to leapfrog ahead of Western counterparts. China especially is already a fast-growing market for eReaders like Jinke Electronics' HanLin eBook, which sells for US$299 and includes 600 free books..."

I was mulling this hypothesis over when earlier this morning I noticed that analyst James Mitchell over at Goldman Sachs has upgraded his "Buy" rating on Google stock, due to the company's "huge presence in emerging markets." He estimates that between 30 and 40 percent of current Google traffic originates in emerging markets.

He notes that "queries and paid leads are growing 2-3x faster in emerging markets than in the U.S. and Europe," although they are of lower value on a cost-per-click basis. (This lower value, at present, is precisely why so many tech sector execs simply dismiss global traffic out of hand -- in my view, a fatal error. Google's leaders, however, are not that stupid.)

One would think that a lightbulb should go off inside the brains of more MBAs in media companies as they contemplate the vast opportunities presented by the fortuitous combination of an emerging global economy and a serious consumer recession in the U.S.

That recession will eventually end, but as President Barack Obama likes to point out, but don't expect that overheated, ever-expanding consumption model that sustained growth for so many years to come back to life. It is over, baby.

Instead, a far more modest lifestyle with a smaller carbon footprint will prevail in the huge U.S. consumer economy, rendering it incapable of carrying the whole world on its shoulders going forward.

Instead, smart companies will look to China, India, Brazil and other markets to help drive the new engines of growth. As an organization and a culture, Google understands this, even as so many of those who envy its success do not.

And, when it comes who wins out, that will make all of the difference.