I doubt they run any of the GSOC decisions through any sort of business case analysis. $150,000 is tiddlywinks to a corporation that generates billions on a monthly tempo. Hand wavy good feels are plenty enough justification for that level of spending.

(That's a ball park estimate of how much it would cost to fund and administrate several projects)

Your premise that Google contains enough business incompetence in enough of the right places to fund a direct competitor explains why they have funded Mozilla in the past. It doesn't really offer much explanation as to why Google did not fund them this year.

Conversely, even the minimum business process of some VP looking at the list and saying, "We are not going to fund a competitor," Occam Razors this year's events.

Your premise, that the only possible reason to fund a competitor is incompetence, on the other hand, strikes me as absurd.

If they weigh business cases at all, they might have considered the value of goodwill they generate for funding competitors to outweigh any loss(es).

Aside: how does Google benefit from sponsoring Blender3D, in your immediate-profit-driven opinion?

I don't think anyone is claiming that they benefit from sponsoring non-competitors, only that they would suffer a disadvantage from funding a competitor, and that this MAY have weighed into their decision-making.

Google haven't supported a number of major projects this year (including some that they directly benefit from), it's not just Mozilla. One assumes, therefore, that the GSoC management decided that GSoC should support more smaller projects this year.

EDIT: If Google only wanted to fund things that directly benefit them, you'd've thought they'd do just that, none of this faffing about with an application process and only funding student work, no?