Google's Loss Is Baidu's Gain

Shares of Chinese internet search leader Baidu (Nasdaq: BIDU) shot up, while those of its closest competitor Google (Nasdaq: GOOG) fell, after news that Google will no longer censor its internet search results in China.

Google made the decision in response to what Google claims was "a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google."

Google went on to say that it has "decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all."

While Baidu already has a majority lead in the Chinese internet search market share, Google was its biggest rival and long-term threat. With the possible removal of its biggest competitor, Baidu is in position to claim an insurmountable lead in the Chinese market.

Another rival, Yahoo (Nasdaq: YHOO), pulled out of the Chinese market long ago and is still facing lawsuits related to its compliance with Chinese law and the handing over of sensitive user information to Chinese authorities.

Google, a company whose motto is "Don't be evil", has already received a great deal of criticism for complying with Chinese censorship laws.

Microsoft Corporation (Nasdaq: MSFT) is another of Baidu's competitors. Yet, despite Microsoft's near Monopoly lead in desktop operating systems and its huge cash hoard, the company has hardly made a dent in the Chinese market, with an estimated 5% of market share.

Baidu may now find itself in the same comfortable position inside its home country that Google has enjoyed in the US and much of the world.