Baidu: Buy Now or Regret Later

First of all, let’s point out the many things a skeptic could say about Baidu (BIDU). The online search industry is expanding in China, and as such, is attracting competitors at an increasing rate. An alliance between China Mobile (CHL) and Xinhua News Agency seems poised to provide some competition for BIDU in the search business. China has 500 million subscribers and Xinhua is largely known for their cutting edge news services. So, many analysts believe leveraging both brands and their current services they will be able to provide a superior user experience to BIDU. I believe this is overblown, as neither firm has experience in the internet realm or online search. They are entering a realm where one of their major advantages (CHL’s massive subscriber base) will have to compete in a mobile search market where Baidu already has a 30% share.

Mightier foes than CHL and Xinhua have attempted to dislodge Google (GOOG), for example, with terrible results. Also, consider that BIDU already has a 70% Chinese share, which is comparable to Google’s formidable 66% share in the United States. It will take years before these two entrants can create the technology platform that is attractive enough to take share away from Baidu. By the time this happens, if it ever does, I expect BIDU to be embedded in China in much the same way Google is in other markets.

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