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Last Updated: Tuesday, 30 August 2005, 14:23 GMT 15:23 UK
Google loses China market share
Baidu.com's offices in Beijing
Baidu is taking on the big dogs of the internet search engine world
Google, the most used search engine, is under pressure in China and losing market share to its biggest local rival Baidu.com, a survey has found.

According to the China Internet Network Information Center (CNNIC), Baidu is making gains in the main cities of Beijing, Shanghai and Guangzhou.

The company has increased its slice of the market in the three towns by at least 10% in the past six months.

Internet use is growing and China has the potential to become a world leader.

State-run newspaper China Daily - citing research by Analysys International - estimated that China's search engine market is expected to be worth about 3bn yuan (207m; $370m) by 2007, up from last year's value of 700m yuan.

Internet search users are predicted to increase from about 100 million currently to 187 million in two years' time.

Getting exposure

Investors had a chance to buy into the predicted boom when Baidu listed on the tech-heavy Nasdaq stock index in New York earlier this month.

Google is among those who have bought into Baidu and now owns a strategic stake of just under 3%.

Baidu was valued at $850m (478m) ahead of its flotation and its shares, which sold for $27 each, quickly surged to $120.

However, since the share sale questions have been raised over the speed of its future growth - despite it reporting net profit of 12.1m yuan on sales of 69.7m yuan - and the stock has dipped back to trade closer to $83.

It currently has a market capitalisation of $2.7bn and Tuesday's survey has helped reassure investors.

Baidu shares jumped 6% to $83.35 in New York on Tuesday

Carving it up

According to CNNIC, Baidu now has 52% of the search engine market share in Beijing, compared with Google's 33%.

In Shanghai it has a 44% slice and in Guangzhou it is 48%, compared with Google's 38% and 29% respectively.

Three months ago, Google had the biggest market share, CNNIC said.

The rest of the market was split between Yahoo!, Sina and Sohu.com.

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