Google's share of the online search market in China has slipped and will continue falling because top Chinese search engine Baidu is more popular among new Web users in the country, a government report said last September.
Google was the first-choice search engine for just 12.7 percent of search users at the end of last August, a fall of 3.9 percentage points from 2008, according to a report by the China Internet Network Information Center, China's domain registration agency.
The same figure for Baidu was 77.2 percent, up 0.3 percentage points, it said.
Google this week said it plans to stop censoring Google.cn, its search engine aimed at Chinese users, and that the move might lead it to shut its China offices altogether. Analysts doubt China will allow Google to run an uncensored Chinese search engine.
Google also said it had been hit by sophisticated cyberattacks launched from China and largely aimed at accessing the Gmail accounts of Chinese human rights activists.
Google launched its Chinese-language search engine at google.cn in early 2006, and at the time spelled out its position on business in the country.
"We will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China," the company said four years ago.
The local search engine in China is Baidu, and it is by far the dominant search engine in China. It handles about two-thirds of online searches performed in the country, with Google in a distant but clear second place, according to local consultancies.
While Baidu is China's dominant search engine it remains locked in competition with Google for more of the search market.
Baidu accounts for nearly 70 percent of online searches done in China, compared to about 20 percent for Google, according to China IntelliConsulting.
Google users who called the search engine their first choice also switched to another search engine more readily than Baidu users did, it said.
"Google has subpar usage and first-choice rates among new Internet users," the report said, predicting a further rise in Baidu's dominance next year.
"As the number of Internet users quickly grows, Baidu's first-choice users will continue rising."
The fall in Google's market share appeared bigger because the report separated out users of Google from users of a local search engine that was powered by Google until this month.
The change had not occurred during the time period covered by the report, which said crunched the numbers separately to show future trends.
Just 6 percent of Chinese search users have tried Bing, the report said. But Microsoft's large user bases in Internet Explorer and Windows Live Messenger could eventually boost that number, it said.
Internet Explorer is by far the most commonly used browser in China, and Windows Live Messenger is an extremely popular chat client in Chinese offices and Internet cafes.
China's fast-rising number of Internet users surpassed the size of the US population to reach 338 million earlier this year.
But much of China's population of over 1.3 billion remains offline, and new Web users increasingly come from less developed areas away from the country's prosperous coast.
Google, which Chinese users often use to find English-language or work-related materials, is less popular among those users, said the report.
Google was more popular among high-end users than among the general population, while Baidu attracted users seeking entertainment features such as music downloads and video search services, the report said.
Google has expanded a free music-download search service that it offers only in China to compete with Baidu.
The Google service appears to have helped the company reel in young Chinese, but users reported less satisfaction with Google's music search than with its other services, the report said.
Just one in three Google users accessed the company's music search, compared to nearly three out of four for Baidu users, it said.
In 2009 Yahoo was the first choice for just 1.6 percent of Chinese search users, the same as at the end of 2008, the report said. Yahoo competes with a set of local search engines for the small slice of China's search market not held by Google and Baidu.
Reports from Chinese consultancies put Google's share of the online search market between 20 percent and 30 percent in the second quarter.
The longtime chief of Google in China left the company last September to create an angel investment group and was replaced by two other executives in the company.
Baidu.com reported a 40 percent hike in net income last October as the company appeared set to continue strengthening its lead over rival Google.
"Today more than ever Baidu is the number one search engine in China," said company CEO Robin Li in a call with analysts.
Mobile search is one rising focus for Baidu and the company is working hard to develop new mobile services, Li said. Also in October 2009 Baidu announced a search deal with local carrier China Unicom, dealing a blow to Google as the companies race to grab a slice of China's growing mobile search market.
Baidu reported net income of 493 million yuan (US$72 million) for the three months through the end of September, a rise of nearly 42 percent from the same period a year earlier. Revenue was also up nearly 40 percent, reaching 1.28 billion yuan.
Baidu earlier last year announced a vision for its future services that it calls "box computing."
The term describes a Web search box that can also carry out non-search commands, such as launching an application or connecting directly to an online service, said Li. The vision will increasingly drive future Baidu initiatives, he said.
Baidu will switch advertisers to its new bidding platform, Phoenix Nest, it said. The company expects the switch to dent revenue at first but boost it in the long term.