Baidu now all alone????

avatar By: IS
Date posted: 01.19.2010 (5:00 am) | Write a Comment  (3 Comments)

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If you are anywhere on earth, you have heard by now about the stunning news announced by Google last Tuesday night. That it would be ending its current deal with the Chinese government in terms of internet censorship even if that means leaving China entirely. Very surpising given the fact that China is still the largest market in the world (in terms of numbers of course, not $$$) and that while Google does not have the lead yet, it did still have about 35% of market share, 2nd to China’s own Baidu(BIDU).

What will be the consequences?????

There have been many many articles about the impact of this major change on Google but it’s not as clear what this mans to Baidu. If you remember, I have been a fan of Baidu for a long time, as it performed over 200% last year and helped me win the stock picks competition. I also traded in and out of the Chinese search engine a few times. But unfortunately, at this time, I did not have a position on Baidu.
Too bad since the stock gained 13,7% in the first day and even more in following days!! Why??? Because this news is major help to Baidu on at least two levels:
-The obvious.. Outside of Google, Baidu had no real competition in China. Both of them make up 94% of the search share in China so having Google out of the picture (potentially) could mean a much easier life for Baidu at home and making it easier to compete abroad.
-But also, Baidu had problems with the Chinese government over a year ago over some legal issues. You can bet a lot that right now, China’s government will be putting a lot of effort into not only making life difficult for Google but also helping Baidu, which it has a lot more control and influence over. Baidu does not have the potential to cause as many problems to the Chinese government and in the wake of recent events, this is a major positive on its side.
As has been pointed out, Baidu continues to gain ground not only in China but on the world scene, it should soon overtake Yahoo as the world’s #2 search engine, see the graph below from emarketer.com
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3 Comments

  1. Comment by non-believer — January 20, 2010 @ 11:02 am
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    I rate this article as BS as most folks know that BIDU is highly manipulated stock. They provide very little details in their earning calls and China is a black box to many investors.

  2. Comment by IS — January 25, 2010 @ 7:26 pm
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    @non-believer – They might be more of a black box than most companies but as a listed company in the US, they do have the same accounting standards and I tend to trust them. The future is not as clear as they operate in a totally different company but I would hardly compare Baidu(BIDU) to smaller companies listed only on foreign exchanges.

  3. avatar

    [...] most direct consequence of course is that Google might exit the Chinese market and lose important potential revenue & [...]

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