Google’s announcement that it would stop censoring search results in China is huge news–and smart strategy.

In exploring the background, the Financial Times reported:

Google argued internally that while censoring was an unpalatable compromise, it would at least make it possible to open up more of the Web to Chinese Internet users. But the decision was unpopular with many members of Google’s rank and file and never sat comfortably in particular with co-founder Sergey Brin, whose own family’s hardships in the former Soviet Union had heightened his sensitivity to human rights issues.

 

While causing internal angst–and leading to frequent debates about whether or not to pull out–the Chinese compromise has not helped Google to gain the sort of position inside China that it enjoys in many markets around the world.

Google’s decision might get the company kicked out of the Chinese market. But it seems likely that Google is poised to reap huge reputational gains globally from taking a principled stand. Given a choice to do business with Google or Yahoo (whose actions in handing over e-mails to the Chinese government helped put a leading Chinese dissident in prison for 10 years), for example, which one would you choose?

Update: Umair Haque has a terrific post about Google, China, and the fact that “an ethical edge just might be the ultimate cause of advantage… It’s a radical new definition of ‘advantage’ that blows past the stale, tired idea of competitive advantage.”