Oct 19, 2010 14:50 GMT  ·  By

A Google spokesperson confirmed the company will terminate contracts with seven Chinese ad agents.

According to Cindy Qin, Google spokesperson: "The [termination] letter was sent out to them on September 27... We gave them a month's notice, [...] We hope to find new resellers to partner with so we can provide even better service to our advertisers." (via Reuters)

No other official statement was made about this bold move, but the company's Vice-President John Liu previously reassured its Chinese customers that the company plans to remain a major player in the local search market.

Nevertheless, “major” seems to be an overstatement for Google's current position in the Chinese search market, falling behind Baidu, a local search engine.

While Baidu was estimating a market share of almost 70%, Google is still in the aftershock of its “redirection” debacle which almost cost them the entire Chinese market.

After the company has feuded with Beijing officials over search results censorship and mysterious cyber-attacks, it redirected Chinese users to their Hong Kong uncensored search page without any Chinese approval and later threatened to pull out the entire Chinese market.

Relations got warmer between the parts after Beijing authorities renewed Google's Internet Content Provider license this summer.

For now, this mysterious decision from Google is causing uncertainty in the Chinese search market, forcing ad agents to keep away all together from Google due to their volatile situation with local authorities.

With recent economic and market predictions estimating China to become the number one technology market in 2011, Google's role and influence in China seems to be on a downward spiral in the aftermath of this recent move.

Other may support the theory of a fresh start for Google on the search ad market, but that might not be true since Microsoft (in a joint effort with Alibaba) and Baidu have already established solid positions locally.

This seems to be more a fight to survive and keep face in a business environment that lost its trust and favoritism toward the Mountain View company.

The decision to end the seven ad contracts on October 27 will surely reduce ad acquisition in China, and have a negative impact on Google's Chinese AdWords revenue (estimated last year by Credit Suisse at $226 million).