Finding a good story for Google in China will be difficult

Finding a good story for Google in China is going to be tough. Baidu's latest results show it continues to dominate the search engine landscape in China. Baidu also reported its advertiser numbers have increased by almost 26% on 2009 levels, reaching 272,000 - a clear sign of the deep chasm in the paid search arena between it and its nearest rival, Google.

Since June, Google has curtailed its searchable Web index to comply with China's censorship laws. As it now provides fewer results, it cannot post as many advertisements as it had previously. Furthermore, research earlier this year from leading media-focused research, publishing and consulting company, Screen Digest, indicates almost two thirds of search users are happy to use Baidu or smaller Chinese search engines.

According to Cyrine Amor, advertising analyst at Screen Digest, Google is losing market share with the problems it encountered lately with the government. Moreover, Google is also about to end its contracts with seven adwords resellers in China. No reason has been provided for this but Ms Amor says this will likely see Google's share slashed by up to 10-12%.

Screen Digest's figures from earlier this year show Google accounted for 33% share of the Chinese search market, behind Baidu.

In paid search, Baidu has been enjoying a healthy lead. In early 2010, Screen Digest estimated total online advertising revenues in China would reach almost 1.5 billion in 2010, with Baidu accounting for the lion's share ($945 million), then Google with $472 million.

By having over 60% share of the search market in China, has Baidu reached the tipping point much as Google had in western Europe, where its growth from 60%-90% share was incredibly rapid, with its competitors largely incapable of closing the gap? Perhaps it has. What is certain is that Google needs a new game plan if it is to achieve the momentum required to catch a clear home grown market leader.

Table 1: China - Search Engine Share of Paid Search Revenues

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