NOW its SOE vs. DOMESTIC PRIVATE COMPANY WATCH OUT BAIDU

Thu Aug 18, 2011 6:13am EDT REUTERS

* Baidu may face tougher rules after state media criticism

* Protracted campaign could hit Chinas Internet sector

* Baidu shares fall 10 pct in two days after strong 2011 rally

* Baidus online market revenue closes in on CCTV advertising

About 9 months ago we noted that the Central government was planning to open and operate its own search engine. We figured it was because the competition for the eyes and ears of netizens was beeing won by Baidu. This shocked us because Baidu is a shining star of a Chinese global company. Would the government really target Baidu after having dispatched Google?

Well todays news seems to confirm our somewhat cynical take on the situation.

Its important to bear in mind that although China has 400 million Internet users, like all media products, its still mostly a no go for foreign firms and may be so for domestic companies as well. Are we moving toward the dominance of the SOE in this category as well? It seems CCTV is angry about losing ad dollars to Baidu and that may be the real cause. We will keep an eye on this,

By Melanie Lee

SHANGHAI, Aug 18 (Reuters) Increasing scrutiny into Chinas top search engine company Baidu by state media is highlighting the fierce competition developing between traditional and new media over lucrative advertising dollars.

The barrage of criticisms could also signal Beijings intention to toughen its anti-monopoly stance against Baidu and tighten regulations in the Internet sector as a means to enforce its official line, analysts said on Thursday.

The impact of the new media is increasing rapidly and the ad spending on online portals and especially on search engines is rising almost 100 percent every year, said Autumn Zhu, an analyst with technology consultancy RedTech Advisors.

But for old media like TV and print, the growth is flat.

Baidu has about 80 percent of all search market traffic in China, a nation with almos! t half a billion Internet users. It has been building its market share since Google Incs high-profile exit from mainland China this year after a fallout with Beijing over censorship.

Shares of Nasdaq-listed Baidu, which has a market value of nearly $50 billion, fell around 10 percent in the first two days of the week, partly on concerns over possibile fall-out from the criticisms. They edged up 0.8 percent on Wednesday.

http://www.reuters.com/article/2011/08/18/baidu-cctv-idUSL3E7JI0WT20110818