Google to end contracts with China ad agents on Oct 27

SHANGHAI (Reuters) - Google Inc said on Tuesday its termination of contracts with seven large Chinese advertising resellers goes into effect on Oct 27, a development analysts say benefits China’s leading search engine Baidu.

Google, which faced many operational hurdles since its high profile tussle with Beijing earlier this year, said in late September it would terminate the contracts with the seven ad resellers in China, without giving a reason.

“The letter was sent out to them on September 27... We gave them a month’s notice,” Cindy Qin, a spokeswoman for Google told Reuters, confirming it will take effect on October 27.

“We hope to find new resellers to partner with so we can provide even better service to our advertisers,” Qin said.

Credit Suisse estimated in a note on Monday that the seven AdWords distributors contributed 1.5 billion yuan ($226 million) in gross revenue last year or about 40 percent of Google China’s revenue.

Google’s termination of the contracts with the resellers has caused uncertainty in the market and led to slower customer acquisitions by the search giant in China, analysts said.

“Baidu sales people could use this opportunity for customers hesitating between two search engines to use Baidu instead of Google,” said Fiona Zhou, an analyst with JLM Pacific Epoch.

Baidu is China’s leading search engine with more than 70 percent of the country’s search market by revenue.

The firm will report its third-quarter results on Thursday after the U.S. market close.

Reporting by Melanie Lee; Editing by Jacqueline Wong