When Google pulled its search engine out of China seven years ago, it handed a near monopoly to Baidu, the domestic rival founded by Robin Li. The ambitious U.S.-educated computer scientist-turned tech billionaire was hailed as a role model for the wave of overseas Chinese returnee entrepreneurs.

Yet, instead of filling the void to become China’s Google, Baidu now faces the unsavory prospect of becoming China’s Yahoo—a fading internet giant. Baidu’s revenue growth slowed to 6.3% last year from 35% in 2015 and 54% in 2014. The company earns nearly 90% of its revenue from advertising, but its share of China’s internet ad market has declined as advertisers spent more money in areas like social networks and mobile commerce. And a string of unsuccessful investments in new mobile services raised questions about Mr. Li’s ability to adjust to the challenges of China’s fast-changing mobile internet landscape. Topping it all off, Baidu’s net profit dropped 65% last year.