Google Slips in China

A new report shows Baidu.com Inc. increased its share of the search market in China's top cities, while rival Google Inc. lost ground despite continued heavy investments in its Chinese operations.

Baidu has a 69.5 percent share of the search market in Beijing, Shanghai and Guangzhou, up 7.6 percentage points since last year, according to a report (in Chinese) by Peter Lu, managing partner and chief analyst at China IntelliConsulting Corp. (CIC).

Meanwhile, Google saw its share of the market shrink, falling 1.1 percentage points to 23 percent.

Google's decline was offset somewhat by improved performance among students during the most recent six months. But the company continued to lose its older, more affluent users to Baidu, the report said.

These figures are likely to step up the pressure on Google China President Kai-Fu Lee to deliver results for the company. Google China has grown quickly, hiring hundreds of staff and moving into a new building close to the campus of Beijing's prestigious Tsinghua University. But these investments have yet to deliver the hoped-for domination of China's search market and raised concerns the company expanded too fast in the country.

Those concerns came to a head in April, when Google admitted that a software tool released by its Chinese operations used a database developed by rival Sohu.com Inc. for a competing product -- a stunning admission for a company that is widely respected for the strength of its engineering operations and the caliber of its software developers.

The CIC report had some good news for Google. The company's efforts to strengthen its Chinese search capabilities are recognized by users, with 58.5 percent of respondents in a survey saying they'd noticed changes to the search engine. Of those respondents, 65.3 percent said Google's Chinese search engine had improved.

Other search engines also saw their share of the search market decline. Yahoo China, which is run by Alibaba.com Inc., saw its share drop 2.9 percentage points to 2.3 percent of the market, while Sohu.com's Sogou search engine fell 1.4 points to 1.8 percent.