beyondbrics

Since Google’s partial retreat from China last year, the company has been losing an increasing amount of market share to Baidu, its Chinese competitor. On Tuesday it was more salt in Google’s eyes when Baidu reported stronger-than-expected fourth quarter revenue on the back of an increased share of online advertising.

But Google’s recent changing of the guard, with Eric Schmidt now at the helm, could mean a more assertive approach in China in future, something Schmidt himself hinted at in an interview last week.

On Tuesday, Baidu reported a doubling of revenue and 171 per cent increase in net earnings in the fourth quarter of 2010, beating both analyst and company expectations. The strong performance is in part due to Google’s decision last year to reroute its traffic to its Hong Kong servers in order to evade self-censorship. Kathrin Hille reports from Beijing:

Google’s share of Chinese internet search revenues has since dropped dramatically. According to Analysys, the Beijing-based internet research firm, it hit 19.6 per cent in the fourth quarter, the first time to drop below 20 per cent since early 2007. Baidu’s market share hit a new high of 75.5 per cent.

But while Google may seemingly be the underdog in China’s search engine market, Schmidt indicated his enthusiasm to step up the company’s China game in an interview with the BBC last week. He said:

between the three of us [Larry Page, Sergey Brin] I’ve always been the person who believe the most in expanding in China…over time, especially in my new role, I can try to get more [of] Google… into China.

Schmidt also said that Google would focus on the success of its mobile operations in China – where Android, its counter to the iPhone platform, is gaining popularity.

A Google spokesperson told beyondbrics that this would also be a big focus in other Asian markets, where Google looks to be stepping up its game.

Last week Google also announced that it would be hiring an addition 500 employers in Asia, and expanding its business in Malaysia where it will open its first new Asian office in four years.

A Google spokesperson told beyondbrics that Google is “very committed” to the region, and “our emerging businesses are on fire”:

On the engineering side, many significant projects involving Google Maps, YouTube, and Android, to Search and Ads, are being led in our Asia engineering centers. On the sales side, our new hires will also be helping businesses make the most of the Internet in this region, which has the largest Internet user base globally.

For now, Google’s loss in China continues to be Baidu’s gain but whether Google’s partial retreat from China is the real reason for Baidu’s growing success is still unclear.

What is clear is that the California-based internet behemoth might have harder work to do. As beyondbrics reported last month, 77 per cent of (35,000 ) Chinese netizens surveyed said they prefered Baidu to Google. In China, gaining fans may be harder than finding advertising customers or Android users.

Related reading:
Google in China: not as loved as Baidu, beyondbrics
China: Google’s loss is Baidu’s gain, beyondbrics