Google Gains Ground in China's Search Market

The U.S. giant now has one third of search revenue in China but still is far behind market leader Baidu

Google boosted its share of the fast-expanding China search business by three percentage points in the first quarter as the market boomed.

Google took 32.8% of search revenues, up from 29.8% in Q4 and 25.8% a year ago, according to iResearch.

However, its share of total searches fell to 20.9% from with 23.0% in Q4. Its share was 18.7% in Q1 2008.

Google and market leader Baidu together accounted for 95.3% of search revenues in China in the first quarter, with the remainder taken by smaller rivals such as Yahoo China, Sogou, Sina and NetEase.

China's search service market surged 41.2% year-on-year in the first quarter, boosted by an increase of search engine marketing activities by SMEs, iResearch said.

“Although large enterprises cut back their marketing budgets due to the negative impact from the economic condition, SMEs became more active in search engine marketing during the economic crisis, hoping to come out of the difficulties through online marketing,” said the report by iResearch.

Sales in the first quarter were 1.31 billion yuan ($191.8 million) Quarter-on-quarter, revenues from China's search service market dropped 7% due to the seasonal factor of the Chinese New Year holiday.

iResearch forecasts that revenues from China's search service market will rise 30% quarter-on-quarter to top RMB 1.6 billion ($234.3 million) in the second quarter of 2009.

By contrast, Yahoo China's market share has been declining continuously and dropped to just 1.5% in the first quarter of this year. Baidu's market share has declined since the fourth quarter of 2008, and stood at 62.5% in the first quarter of this year.

Another iResearch report showed that despite the decrease in market share, Baidu took away percentage from Google in the first quarter according to search request volume.

Baidu accounted for 74.1% of the total search request volume in the first quarter, up 2.1 percentage points from the fourth quarter of 2008. Google's proportion of search request volume decreased 2.1 percentage points quarter-on-quarter to 20.9%

iResearch attributed Baidu's usage increase to the surge in searches about the Chinese New Year and the CCTV New Year's Gala during the period.

In order to catch up to competitor Baidu, Google began to offer free downloads of legal music in China last year, sharing revenues with its Chinese partner and record companies.

Baidu offers a popular search feature which, despite lawsuits from many music labels, enables users to download music through third-party sites.

In April, Baidu launched a new ad auction system called “Phoenix Nest”, which analysts believe will boost the Chinese company's efficiency in turning traffic volume into revenues.

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