Google's possible pullout a boost to China rival

A possible Google pullout from China could give a boost to its ambitious local rival Baidu Inc., which dominates the Chinese market and is expanding abroad.

Baidu, launched in 2000, is a standout in the global search industry - a local competitor that beats giant Google Inc. Baidu has 60 percent of China's search market and has held onto that despite Google's launch of a local site and relentless efforts to tailor its services to Chinese tastes.

If Google closes China-based Google.cn, Baidu might pick up many of its users and advertisers, analysts said. Google's main U.S. site has a Chinese section but government filters hamper access for users in China.

"It's a huge positive for Baidu," said Citigroup analyst Catherine Leung.

Baidu shares on the U.S. Nasdaq market jumped 13.7 percent on Wednesday to $439.48 after Google's announcement that it would stop censoring search results in China and might pull out of the country.

Even if some Chinese users switch to Google's U.S. site, advertisers in China might be uneasy about being associated with it after the company's statement this week about Web censorship, Leung said. She said up to 80 percent of the Chinese advertiser spending that now goes to Google.cn might be switched to Baidu.

"If Google.cn is shut down, the only real alternative is to go to Baidu," she said. "If Baidu were able to get the majority of Google's market share, that means we are looking at a player with 80 to 90 percent market share in China."

Little known abroad, Beijing-based Baidu is one of the world's most-popular Web sites based solely on its following in China, the world's most populous Internet market with 338 million people online as of June. Web traffic monitoring company Alexa ranks Baidu as the world's 8th most-visited site.

The company launched its first site abroad in 2007 in Japan and analysts expect other markets to follow. Less competition from Google might allow Baidu to boost profits and speed up its overseas expansion.

Baidu, pronounced "Bye-doo," has benefited in the past from government controls over Internet access, though it is unclear whether Beijing tries to promote the site over foreign rivals. China's extensive system of Web filtering tries to block access to material deemed subversive or pornographic.

Baidu built up a commanding lead in market share after the government's filters slowed access to Google's U.S.-based site. Google launched its China-based site in 2005 to speed up access and opened a Beijing center to create services for the China market but Baidu has held onto its lead.

Baidu had 58.4 percent of the search market in the final quarter of 2009, while Google had 35.6 percent, according to Analysys International, a Beijing research firm. Google was up from 29.1 percent the previous quarter, but most of the gains were at the expense of other rivals such as Yahoo's China site.

In 2006, Baidu launched a Chinese-language encyclopedia inspired by the cooperative reference site Wikipedia after access to the American site was blocked, possibly because it has articles about Tibet, Taiwan and other sensitive topics.

Like Wikipedia, Baidu's Baike carries user-written entries but warns that it will delete content about sex, terrorism and attacks on the government.

Leaving China would hamper Google's ability to keep up with local tastes and maintain relations with Chinese advertisers who target audiences both at home and abroad, said Edward Yu, president of Analysys.

"That part of the business will disappear if Google moves out of China," Yu said.