Google Loses China Market Share to Local Rivals After Censorship Standoff

Google Inc., which stopped censoring its China site in defiance of local rules, lost market share in the country with the most Web users for the first time in three quarters as the standoff hurt sales, a researcher said.

The U.S. company’s share of China’s paid-search market fell to 30.9 percent in the first quarter from 35.6 percent three months earlier, Analysys International said in an e-mailed statement today. That was the first decline since the second quarter of 2009, according to the Beijing-based researcher. Market leader Baidu Inc. posted a gain, the statement said.

Google last month moved its service in China offshore to avoid government requirements to self-censor Web queries, further straining relations with regulators after the company’s threat to exit the market in January. The decision raised concerns among clients that the world’s most-popular search engine will become less accessible to Chinese users than locally run sites, advertiser Bessie Lee said.

“Advertisers will want to go with a more reliable service, one that is at less risk of being blocked,” said Lee, chief executive officer for China at WPP Plc’s media buying unit GroupM. Baidu has gained most from Google’s move, she said.

On March 22, Google said the Chinese government could block access to its Chinese service “at any time” after the Mountain View, California-based company redirected users in China to its Hong Kong site. The Chinese government’s system for monitoring Internet use, dubbed the “Great Firewall,” blocked the redirected service for several hours, Google said March 30.

Baidu, based in Beijing, increased its market share to 64 percent from 58.4 percent in the previous quarter, according to Analysys.

Google’s move was effectively a pullout from China and will undermine its search service to Chinese users, Steven Chang, chief executive officer for China at advertiser Zenith Optimedia, said last month.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net;

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