Shares of Baidu (NASDAQ: BIDU ) moved higher on Tuesday after an executive of its video-streaming business expressed interest in an IPO at a tech conference in Beijing.
This would be a smart move for Baidu, longtime Fool contribution Rick Munarriz explains in this video.
Youku Tudou (UNKNOWN: YOKU.DL ) commands a $3.3 billion market despite losing money, and the assets that Baidu has collected in recent months make it a top player in video. An IPO or spinoff would also help improve Baidu's bottom line as video may be a big drag on its bottom line as it was for Google (NASDAQ: GOOGL ) after its initially controversial move to acquire YouTube.
As Google, Baidu, and Youku know, it isn't easy making money by serving up videos and paying licensing fees on top of that. However, as advertisers grow to pay up for personalized video streams, the market will evolve.
Money from an IPO sale? Healthier margins? Finding a way to take its video business public would thrill two birds with one stone.