China's search market isn't doing so bad after all.
Investors have pummeled shares of Baidu (NASDAQ: BIDU) in recent weeks on fears that Qihoo 360's (NYSE:QIHU) summertime launch of a search engine of its own will both eat into Baidu's market dominance and potentially lower online advertising rates. The former may indeed happen over time, but the coast appears to be clear on the latter.
Chinese Web tracker Analysys International is out with fresh research showing that revenue during the third quarter for Chinese search engine operators has climbed 51% over the past year. Even stacked against the second quarter, we're still looking at an impressive 16% sequential pop.
To be fair, the impact of Qihoo 360's August arrival won't be felt until subsequent quarters. Even Analysys' market share data for the period -- with Baidu at 78.6%, Google (NASDAQ:GOOGL) at 15.3%, and Sohu.com's (NASDAQ:SOHU) Sogou -- leaves out Qihoo 360.
That will change. Initially it will eat at Google China, since it was Big G's search that was powering Qihoo 360's popular Internet browser before the company launched an in-house solution. However, in time we will learn if Qihoo 360 is more than just a novelty and if it's able to successfully monetize search.
It is against this backdrop that at least Baidu will be providing some answers. China's biggest dot-com will report its third-quarter financials early next week. Analysts see revenue and earnings growing 53% and 54%, respectively.
The stock has been beaten down to the point where a strong showing or perhaps even a modest report will renew bullish interest in Baidu. Then again, the real questions that the market is asking won't have an answer until early next year.
Betting on China
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Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Baidu and Google. Motley Fool newsletter services recommend Baidu, Google, and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.