Baidu Hopes Google Loss In China Is Its Gain

Google's much publicized fight with Chinese government officials over censorship and the uncertainty that now surrounds its China operations is giving new life to its competitors, with China search giant Baidu looking to reap the most benefit.

Baidu's vice chairman of sales and marketing, Xiang Hailong, said his company's share of the search engine market in China has shown "marked improvement" this year and that it hopes to soon control more than 80 percent of the market. Back in March, the Beijing-based IT industry consultancy iResearch said Baidu's share in the domestic market had grown to 76 percent at the end of 2009.

The numbers are encouraging for Baidu, but that doesn't mean Google is beaten in China. Some of the best parts of Google are still accessible, such as its maps and free music service. The latter is one of the key elements behind rival Baidu's early success.

So despite the fallout from its censorship fight, Google still manages to hold on to many of its users, said Mark Natkin, managing director of Beijing-based Marbridge Consulting. "There is a time cost in learning to manage new services such as Gmail and mapping, so users accustomed to Google services will most likely keep using these services as long as they can."

But Google's clients may not be so loyal. Google's advertisers have much more to lose if it bottoms out in China. Many of them are already experimenting with ads on other search engines, and those who do not want to risk the uncertainty at Google may bet more on Baidu.

Other, lesser known search engines are also using the Google dust-up to more aggressively court Google's advertising clients. For instance, one of China's biggest portals, Sohu, also has a search engine.

Called Sogou, its strategy for winning clients from Baidu is pretty simple -- low pricing. It costs just $75 to open a new advertising account on Google, much lower than the $1500 Baidu charges. Many smaller companies that advertise with Google cannot afford Baidu, so Sogou is trying to entice them by offering discounts.

Analysts believe Baidu's grip on the search engine market will be hard to crack, yet it only has a little over 20 percent of China's online ad market. So it remains to be seen if Baidu will end up winning big financially if Google's advertisers end up placing their money elsewhere.