Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Baidu Hits a New Hi (Nasdaq: BIDU  ) thinks, therefore it IMs.

China's top search engine is throwing its hat into the instant messaging ring, a fast-growing market dominated by Tencent's QQ and Microsoft (Nasdaq: MSFT  ) , with this morning's introduction of Baidu Hi.

The move makes perfect sense. Baidu has used its search engine prowess to launch sticky community sites devoted to everything from discussion boards to social networking. It's the perfect pivot point. If folks are text chatting in real-time online, why wouldn't Baidu want a piece of that?

It's also a booming market. According to Web information company Alexa, is the second most popular website in China, trailing only Baidu. Yes, the hot IM platform is getting more traffic than SINA (Nasdaq: SINA  ) and Google (Nasdaq: GOOG  ) . It's not as easy to monetize an IM application as it is with search, but it's more about keeping up with the trends and eyeballs than the pocketbooks.

The key to success comes from paddling into new revenue streams without diminishing the brand as a search engine workhorse. Yahoo! (Nasdaq: YHOO  ) didn't necessarily fall behind Google in search usage because it dove into things like job listings, dating personals, and instant messaging, but the lack of focus probably didn't help.

The good news is that Baidu hasn't slipped despite launching dozens of similar forays in the past. Even more recent moves like launching its search engine in Japan and developing an eBay (Nasdaq: EBAY  ) clone haven't diluted the brand's popularity. New initiatives also haven't materially weighed down the company's earnings power, going by this month's fourth-quarter report, which found earnings soaring 79% despite the Japanese expansion.

If it isn't obvious to you by now, I'll state it loud and clear: I like both this move and Baidu as an investment at this point.

I recommended shares of Baidu to Rule Breakers newsletter subscribers in the fall of 2006. The stock has tripled since then, but earnings have grown even faster. In other words, Baidu is now trading at just 40 times next year's profit target. Clearly it is growing faster than that. Baidu may be going Hi, but the valuation appears to be anything but high.

Hi, Foolishness:

Read/Post Comments (0) | Recommend This Article (12)

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: 588767, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:13:02 AM

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 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

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

10/21/2016 4:00 PM
BIDU $176.76 Up +1.59 +0.91%
Baidu CAPS Rating: *****
EBAY $29.06 Up +0.04 +0.14%
eBay CAPS Rating: ****
GOOGL $824.06 Up +2.43 +0.30%
Alphabet (A shares… CAPS Rating: *****
MSFT $59.66 Up +2.41 +4.21%
Microsoft CAPS Rating: ****
SINA $76.29 Down -0.51 -0.66%
Sina CAPS Rating: ***
YHOO $42.17 Down -0.21 -0.50%
Yahoo CAPS Rating: **