Baidu (BIDU, Financial), the Chinese web services giant has been doing well due to the diversification of its business. Baidu offers many services, including a Chinese language-search engine for websites, audio files and images. Baidu provides 57 search and community services including Baidu Baike (an online, collaboratively-built encyclopedia) and a searchable, keyword-based discussion forum. The company’s dominance in the Chinese industry makes it a good stock for the long run. The company has been consistently performing well despite stiff competition from the like of Qihoo 360 (QIHU, Financial) and Sina Corporation (SINA, Financial). The company has consistently recorded double-digit growth, and I expect this trend to continue.
In the last quarter, Baidu’s overall revenue was RMB12.7 billion, an increase of 34% year by year. Counting of active online marketing costumers reached 524,000, an upsurge of 17% from the consistent period in 2014 and even from the previous quarter.
Diversification is a plus
In China, Baidu is the biggest search engine. According to China Internet Watch, company appeals approximately 80% of all search revenue inside the country in the first quarter of FY15. Revenue growth is mainly driven by mobile, which has touched 50% of top line. In mobile revenues, mobile search contributed a lot followed by vigorous traffic growth and refining monetization.
In Q1FY15, Baidu mobile search monthly active users escalated by 60 million from 540 million to 600 million compared to previous quarter and added about 270 million monthly active users in mobile maps.
Baidu supports ITE which continues to implement very healthy and grow its Q1 top line revenue over 80% year-on-year. Baidu significantly profited from Google’s fractional withdrawal from mainland China in 2010.
At the present time, Qihoo 360 is the main competitor of Baidu, which maintains a search engine, web browsers, virtual goods and free antivirus software. Qihoo is showing continual growth in market shares. In past time, Qihoo’s market shares in Chinese page views rose from 18% to 29% and during that period (between August 2013 and 2014), Baidu’s share plunged by 26%. Continual growth of Qihoo has a positive result, but it equals less than 10% of Baidu’s marketing revenue and hence clearly states that Baidu’s search engine is considerable more gainful.
Belongings get bushier as we work our way down the income report. Baidu missed an opportunity, as Tencent and BABA were early movers into this space. Baidu is capitalizing in low-margin slots; as it will not help in maintain its position. To alleviate the threat, Baidu was stated to invest $600m in Uber, which could be an irrelevant threat to Didi and Kuaidi. But once the business of these two taxi apps combined, Uber's 1% market share will face severe challenges compared to 99% market share that Didi and Kuaidi possessed. Baidu still commands two-thirds of the search queries on PCs in China. Baidu is dawn to taxi app game. Still the strategy has a positive side for Uber’s growth in China.
Conclusion
Analysts expect internet penetration in China to grow substantially in the months to come and Baidu is nicely placed to profit from this growth. The company’s shrewd initiatives have helped it reach the pinnacle of the Chinese market and I expect the company to stay there for many years. Hence, I would recommend investors to load up on Baidu.
