Baidu sinks over treats from Qihoo 360

China's largest search engine provider Baidu(NASDAQ:BIDU) plunged 5.9% Tuesday, the biggest daily loss in 10 months, over worries of competition from Qihoo 360's new search engine.

Qihoo rose 7.7% to a new 3-month high as its new search engine is expected to bring the company increasing revenue from advertising.

The Chinese Internet company known for its antivirus software and web browser launched its search engine last week, which shockingly became China's second largest search engine only five days after its debut, scooping 10% of the country's search market, according to CEO of Internet services provider Jinshan Network Fu Sheng.

The search engine is likely to see a much stronger growth as the company bundles it to more of its products while at this moment most of the traffic comes from bundling to its website navigation and browser, said a former Sogou emploee.

Sogou's now China's fourth largest search engine provider after Baidu, Qihoo and Tencent.

In a survey on China's popular micro-blogging site Sina weibo, 14.2% of the 1332 respondents said they will use Qihoo's search engine while 76.5% preferred Baidu.

The Maxim Group estimated Qihoo is likely to report a Q3 revenue higher than the average 77.8million U.S.dollars that predicted by eight Bloomberg analysts.

Qihoo on Tuesday reported a revenue increase of 107.3% to $72.8 million in the second quarter of 2012, driven by strong performance at both online advertising and Internet value-added services, while the net income was down $4.1million from the $11.1 million in the second quarter of 2011.

The company said in the statement that it has allocated significant resources to make proactive investments in product and technology development, particularly in areas of mobile Internet, cloud based services, and search engine.