Baidu will take a long, hard look at Google

Among those thinking hardest about the implications of Google's move to redirect its Chinese users to its uncensored Hong Kong website is probably the management of Baidu, Google's local rival and the market leader in China.

Since Google's announcement in January that it was reviewing its China strategy, analysts have begun to factor in Baidu winning market share from Google in their revenue estimates for the Chinese company. But Robin Li, Baidu's chief executive, has been careful not to underestimate its US competitor. When he reported forecast-beating fourth quarter results last month, Mr Li said he did not expect any major change in the competitive landscape. "The damage [to Google] is not going to be as severe as we thought earlier," says Li Zhi, online search expert at Analysys, the Beijing-based research firm. "If traffic levels can be held at the Hong Kong website, ad customers' confidence might come back, and the drop in Google's market share might be limited." China's online search market grew by 39 per cent to Rmb7.15bn ($1bn) last year and is expected to reach Rmb10bn this year, according to Analysys. "Currently, we expect Baidu revenue market share [will increase] from 57 per cent in 2009 to 59 per cent in 2010," says Wallace Cheung, an analyst at Credit Suisse. "Baidu's recent surge has factored in the potential gain of Google's 'exit'. We believe Baidu is fully valued."