As you might have heard, last week Google threatened to pull out of China. The news spread like a virus online and had a lot of people talking in China and around the world. The information first appeared on Google’s official blog in “A new approach to China”, posted by David Drummond, SVP, Corporate Development and Chief Legal Officer of Google. The same day, the indices of GOOG went down by 1.3%. Rather than debate whether a retreat from China would be a good or bad move for Google, we would like to discuss the effect it could have on Google’s portfolio, partners, users, and competitors.

Firstly, if Google leaves China they take with them not only their search engine but their additional services as well, such as Gmail, Google Reader, Google Books, Google Maps, Google News, Google Chrome, Google Calendar, and more. They will also take their newest product, the Nexus One mobile phone. Google intended to take on iPhone, Nokia, and other Smartphones with this star product. But without the support of the web, Nexus One seems to stand no chance in the Chinese market. Users in China will have to abandon their use of Google search engine, which was particularly popular for English language search, and stop using the special services and applications mentioned above.

In possibly a more desperate situation than the users are Google’s partners for various projects in China. Both time and money would have been spent developing potentially lucrative products and services for the Chinese market, investments which will either be disrupted or never realized.

What about Google’s competitors? For example, Baidu, the search engine with the largest market share in China (59%), saw its stock price rise by 7% on the day Google made the announcement. Could they stand to take over Google’s piece of the pie? Other smaller players such as Yahoo could become the second largest search engine in China overnight. Dingding.net could take the advertising business Google’s ex-clients. And iPhone might not have to worry as much about its market share in China. The list goes on.

This brief analysis shows that no brand is an island. Google’s retreat from China cannot be looked at in isolation without considering the other parties involved. One thing’s for sure, it is hard to make geographically-bound decisions in today’s interconnected world. So what will Google do? We’ll have to wait and see.