Is This Baidu's Next Problem?

Shares of (Nasdaq: SOHU  ) opened nearly 6% higher this morning. The Chinese dot-com pioneer posted better-than-expected quarterly results. Revenue climbed 23% to $285 million. Adjusted earnings fell 40% to $0.77, as the company invested in new growth initiatives that won't pay off right away, but it could've been worse. Sohu's bottom-line showing was still an 80% sequential improvement. Perhaps more important, analysts were only holding out for an adjusted profit of $0.46 a share on $275.9 million in revenue.

However, a few items into Sohu's report, we see that Sogou is on fire.'s fledgling search engine saw its revenue soar 102% to $32 million. Keep in mind that during those same three months we saw China's leader (Nasdaq: BIDU  ) grow at just a 50% clip.

Is Sogou growing its revenue twice as quickly as Baidu a fluke? Not really. Sogou has been a speedster for some time, and it will continue to smoke Baidu during the current quarter. Sohu sees revenue at Sogou climbing 74% since last year's fourth quarter to $40 million. Baidu, on the other hand, is targeting just 38% to 42%.

At a time when the market's concerned with Qihoo 360 (NYSE: QIHU  ) eating into Baidu's market share since its summertime launch, are we eyeing the wrong threat?


Let's put this into its proper perspective. Sohu's Sogou is blazing away in the monetization process, but it's still a sliver of Baidu. The $37 million that it generated in the third quarter is 3.7% of the $994.65 million forecast for Baidu. At the midpoint of Baidu's top-line outlook for the current quarter, Sogou's $40 million is still just 4% of Baidu's forecast of $994.65 million.

Qihoo 360 has a larger share of the search market than Sogou, but it's actually well behind in terms of generating revenue from search.

Either way, Baidu was never going to own the entire search market. Until someone grows to the point where it's making a sizable dent -- and that certainly isn't Sogou just yet -- Baidu will be just fine.

Betting on China
Want to learn more about the Middle Kingdom's Internet leaders? Check out The Motley Fool's premium report on Baidu, which dives deep into China's dot-com darling. The premium research comes with a year's worth of updates. Just click here to get started.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2095537, ~/Articles/ArticleHandler.aspx, 10/25/2016 3:29:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,166.43 -56.60 -0.31%
S&P 500 2,142.59 -8.74 -0.41%
NASD 5,279.16 -30.67 -0.58%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 3:14 PM
BIDU $176.46 Down -4.40 -2.43%
Baidu CAPS Rating: *****
SOHU $39.10 Down -0.53 -1.34% CAPS Rating: ***
QIHU.DL $0.00 Down +0.00 +0.00%
Qihoo 360 Technolo… CAPS Rating: **