Baidu Keeps Taking Names

If you can't beat 'em, you may as well enlist 'em. According to a Piper Jaffray report, Baidu.com (Nasdaq: BIDU  ) keeps making more friends in high places, with established companies looking to cash in on the leading Chinese search engine's popularity.

According to analyst Safa Rashtchy, Baidu is in talks for a search-distribution agreement with Microsoft (Nasdaq: MSFT  ) in China. Baidu is also brokering similar deals with blue-chip Internet service providers China Telecom (NYSE: CHA  ) and China Netcom (NYSE: CN  ) .

Baidu's angle is obvious. The more virtual real estate it can lock up now, the better. Internet service providers tend to make their own landing pages the default starting page for their customers, and that's a great place for Baidu to show up. As for Microsoft, turning to Baidu may seem to be conceding defeat, but it has its hands full with the recent domestic launch of Live.com. Baidu is so far ahead of its rivals -- commanding nearly two-thirds of the Chinese-language search engine market share -- that Microsoft is probably endearing itself to the locals by playing nice with the home team rather than taking on Baidu the way that Google (Nasdaq: GOOG  ) has lately.

Raschtchy estimates that the deals would result in 50 million more daily searches through Baidu, generating between $10 million to $20 million in additional annual revenue for China's top online destination next year. That's not necessarily chump change for a young company like Baidu. It would boost next year's top-line targets by 5% to 10%.

More importantly, it would become that much harder for outsiders to catch up in a race where the competition keeps fading further away from Baidu at the finish line.

That's the way you win the race. Run hard, drink plenty of fluids, and make sure you take breaks to sign as many search distribution deals as possible while you've still got the lead.

Baiduis a recent recommendation in theRule Breakersgrowth stock newsletter service. Microsoft is anInside Valuepick.

Longtime Fool contributor Rick Munarriz has been to mainland China just once, but he's longing to brush up on Mandarin and make another go in the future. He does not own shares in any of the companies mentioned in this story.Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.


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