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10:20 AM

Google Cuts Ties With China Ad Agents

Baidu nabbed a record 70% of the Chinese search market, as Google's share dipped to 24%.

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Google's woes in China appear to be worsening, despite the government's recent renewal of its Internet license. The company said Monday that it had cut ties with two of its Chinese advertising agents, raising concerns about whether other clients will slowly start to drift away from the search giant if it remains on the outs with officials.

Google ended partnerships with Universal Internet Media and Xi'an Weihua Network, which are the major advertising agents for Google in East and Northwest China, a Google spokesperson said. The firms are two of 25 that cover the nation for Google.

The search engine's market share in China dipped to 24% in the second quarter, a rapid decline from a 31% in the first quarter, according to research firm Analysys International, which measures market share by advertising revenue.

The share of Baidu, Google's main rival in China, hit 70%, a record for the company. Analysts believe Baidu is clearly benefiting from Google's tangle with the government earlier this year.

Google said it would stop self-censoring its search results after hackers broke into its company network in Beijing, a move that some suspect had government backing as it targeted not only proprietary code but also certain Gmail user accounts. Since then, Google has redirected traffic to its Hong Kong site, which it does not censor.

Baidu is also looking to capture more of the mobile search market in China. Somewhat brazenly, it is trying to persuade users of Google's open source Android OS to prominently embed Baidu's search box rather than Google's. The mobile search market in China is still in its nascent stage, but is expected to grow rapidly.

Baidu and Google had been more evenly matched in the space a year ago, each with about 25% of the market, but the latest figures from Analysys show Baidu has powered ahead, accounting for the most mobile searches in the second quarter -- 34.3% of the market, up five percentage points from the first quarter. Meanwhile, Google's share plummeted by about five percentage points to 12.3%.

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