Google Inc. (GOOG) To Shut Down Free China-Only Music Download Service

Shares of Google Inc (Nasdaq: GOOG) rose $5.68, or 0.78 percent, to $733.8 in Friday’s midday trading. Google's main Asian competitor Baidu.com Inc. (Nasdaq: BIDU) fell 0.34 percent, to $110.88 in Nasdaq Stock Market trading.

According to Google China’s blog post on Friday, the Internet search giant said the 3-year-old service failed to achieve the market impact it wanted and will be shut down.

"The impact of this product is not as great as we expected, so we decided to shift resources to other products," Google stated.

As of now, all its streaming and legal MP3 downloads have been terminated and users will be given until Oct. 19 to export their music playlists as downloadable files. Users opening the page for the music service are getting a one-line message that reads: “Google Music Search service has been turned off, please log in before Oct. 19 and download your saved playlist.”

Launched in 2009 with a local partner, the Google Music Search -- available only to computers with an Internet address in mainland China -- was meant to be a legal music search competitor to Baidu.com Inc.’s (Nasdaq: BIDU) popular music service, which at the time was providing users with links to copyright-infringing music.

Google, based in Mountain View, Calif., added that its China-based staff working on the music site will be re-assigned to work on other projects so there will be no job cuts.

Google closed its mainland search engine in China in 2010 after saying it no longer wanted to comply with Beijing's Internet censorship following hacking attacks traced to China.

As a result, the company moved its Chinese site to Hong Kong and saw its share of China’s search market dwindle. Since then, Baidu’s overall share continued to grow and last year, Baidu launched a legal music search in a landmark deal with record labels.

In June, Google added a feature to alert Chinese users searching on its Hong Kong site of words that were blocked and to warn users whose accounts it believes are targets of "state-sponsored attacks."

China is home to more than 500 million Internet users, and second-quarter search-advertising revenue reached more than $1 billion, according to research group Analysys International.

Google said in July its second-quarter earnings rose 11 percent despite a deepening decline in the prices paid for its Internet search advertising. The results included Google's $12.5 billion acquisition of cellphone maker Motorola Mobility Holdings Inc. for the first time. Revenue climbed 35 percent from last year to $12.2 billion. If not for Motorola, revenue would have increased by 21 percent.

Baidu, owner of China’s most-used search engine, reported a 70 percent jump in its second-quarter profit, as the Beijing-based company increased advertising sales to new customers. Net income climbed to 2.77 billion yuan ($434 million), or 7.86 yuan per American depositary receipt, compared with 1.63 billion yuan, or 4.67 yuan, a year earlier.