Big dogs have to deal with little ones snapping at their heels. Welcome to the world of Baidu, China’s biggest internet search company. As search becomes more about browsing on the move using a mobile phone and less about sitting at a desktop, Baidu is facing the pain of new, smaller rivals. The latest is Qihoo 360.

Qihoo has a 10th of the $38bn market capitalisation of Baidu but it is a savvy software company. It has attracted web traffic through its mobile applications and antivirus software, and started to monetise its search function this year. While Qihoo holds just 3 per cent of China’s internet advertising market, compared with Baidu’s 30 per cent, its share is growing.

This creates more problems for Baidu’s margins – note the guidance in yesterday’s fourth-quarter results. First, mobile now makes up a third of Baidu’s search traffic yet contributes just a 10th of search revenue, estimates Maxim, a research company. Competition could force Baidu to drop ad prices and pay more to attract users. Traffic acquisition costs have been ticking up to almost a 10th of revenues. It also leaves Baidu spending more to acquire smaller rivals to protect its traffic. It recently bought iQiyi, a video site.