5 Billion Reasons to Buy Baidu

While Wall Street worries about Baidu's (NASDAQ: BIDU  ) dominance and mobile efforts, one thing remains clear: Baidu is the "King of Search."

Or so it seems.

According to Baidu Director of International Communications Kaiser Kuo, via tech blog Tech in Asia, Baidu processes more than 5 billion search queries per day. That's measured across search, community, and partner sites and across all device platforms.

For comparison, Google (NASDAQ: GOOGL  ) processes just 3.3 billion queries per day. Now, to be fair, this number doesn't include Google's properties, such as YouTube and Gmail, and altogether Google may in fact process more searches than Baidu. But even so, a Google lead could be short-lived. When you dig deeper into the numbers, Baidu could double, maybe triple, its search queries.

Don't believe me? Well, to make things simple, let's consider the company's respective home markets.

In the U.S., Google commands 67% of the U.S. search market. Yet, that still that pales in comparison with Baidu's 72% market share in China. Furthermore, the U.S. has 78% of the people online, amounting to 245 million Internet users. Altogether, that means Google's market is 191 million people.

Baidu more than doubles that figure with 406 million users. China has a 42% Internet penetration in China, totaling 564 million Internet users.

Now, Google is already a huge, international company with 53% of its revenues coming in from its 50 international offices. More importantly, Google's products are are well established, and they are often the market leader when it comes to search, video, and mobile operating systems abroad.

However, Baidu does operate in 130 countries and has made significant moves over the past few months in capitalizing on its international expansion. Just this week, Baidu released its mobile developer tools in English. And in January, the company struck a deal with France Telecom to create a better mobile experience for customers in Asia, the Middle East, and Africa. Finally, the company released an antivirus suite in Thai and English in early January. As the search market is still in its infancy abroad, especially in Third World countries, Baidu has the chance to remain the "King of Search," with maybe 10 billion, 15 billion, or more searches per day.

Nonetheless, there are fears. Wall Street is worried that Qihoo (NYSE: QIHU  ) may beat out Baidu's search dominance.

So far, there isn't a report on the number of searches per day newcomer Qihoo has, but according to market share reports, Qihoo has 11% of the country's Internet population, or 62 million people using the service. And that's all within the span of a little more than half a year.

As time goes on, Qihoo could get stronger. In fact, Qihoo seems as if it has. Amidst its dwindling search market share in China, Google and Qihoo struck a deal last month giving the new search competitor access to Google's ad optimization techniques.  

Moreover, it was rumored that Sohu's (NASDAQ: SOHU  ) Sogou and Qihoo were in talks of partnering together. The partnership would result in a combined 18% of the total search market. Now, that's not much, but, as China is undergoing a shift to mobile, it would give both companies a window of opportunity to turn in more search queries that Baidu.

Whether or not such a partnership will materialize is a different story. I don't think it's likely. Sohu and Qihoo seem to be on the verge of converging business models -- Web portal, search engines, and desktop browsers -- which would lead to eventual conflict. Moreover, both have had blowout quarters. In Q4 2012, Sohu saw revenues grow 78% year over year, while Qihoo's revenues rose by 215%. So the companies may already be too proud to cooperate on a high-functioning level needed to take on Baidu.

Even if Qihoo and Sohu are able to strike a deal, unseating Baidu is unlikely. As fellow writer Rick Munnariz has noted, Microsoft's (NASDAQ: MSFT  ) Bing has tried to unseat Google by "populating the Web with Bing search boxes." Even as Bing started with more search market share than Qihoo and Sohu combined, it has yet to make a true dent in Google's stateside dominance.  

Why is that?

Ultimately, online search seems to work best as natural monopoly. That is, search functions most efficiently and creates the most value for customers when there's just one player. And now that Google and Baidu both have properties in video, email, the cloud, and more, the data that they know about their customers is even greater. In turn, these companies can use that data to ensure their dominance in other Internet verticals -- like mobile.

So, Baidu bears, say what you will about mobile or competitive worries. In the end, I expect Baidu's current price of $92.56 -- close to its 52-week low of $85.96 -- to be an incredible buy opportunity. Search engines become more powerful with every search. Now that Baidu is processing 5 billion queries a day, the company will remain China's top dog and maybe, in the future, become more powerful than Google.

If you're interested in buying China's dominant search engine, then you won't want to miss out on our brand-new premium report. In it,  we've further listed "3 Reasons to Buy" Baidu right now. Just as important, we've also highlighted the weaknesses you need to watch out for. To access the report now, just click here.


Read/Post Comments (5) | Recommend This Article (9)

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.

  • Report this Comment On March 03, 2013, at 1:01 AM, raymondfoster wrote:

    hmmm... lets take a deeper look, if this stock is that valuable then something is wrong with the system, OR the american buying and influence is much more powerful than people want to portray.. baidu which has 400+ million people searching, BUT only at 92 a share, and GOOG has 150+ Million, but valued over 600 a share.. then the obvious is clear... no other country buys at an alarming rate...

  • Report this Comment On March 03, 2013, at 5:36 AM, jiananzhang wrote:

    I am china and now used baidu.Because google is not "Abide by the rules of the game" in china,baidu is king.but not like other two company QQ and a li ba ba,he think he is king and CEO yanhong li say Mobile Internet is not baidu's future.arrogant ?

  • Report this Comment On March 03, 2013, at 7:56 AM, MaryPezzi wrote:

    Who the heck would support Baidu "search" that is filtered by the Chinese Communist government, and the ONLY game in town... only reason it has high usage.

  • Report this Comment On March 03, 2013, at 7:23 PM, TMFKang wrote:

    Hi MaryPezzi,

    Actually, Baidu isn't the only game in town. The Chinese government has a state-run search engine that barely anyone uses. Furthermore, the government has arrested Baidu employees for indiscretions regarding ad sales.

    Kevin

  • Report this Comment On July 04, 2013, at 10:09 AM, fg0616 wrote:

    Baidu search engines need to be more powerful and accurate. As well as expanding overseas.

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