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Baidu Stock Making Headlines for Anything but Search

By Rick Munarriz – Mar 27, 2016 at 9:00AM

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China's leading search engine is rolling on news of self-driving cars, divestitures, and new platforms, but it's ultimately fueled by its flagship business.

Image source: Baidu. 

Remember when Baidu (BIDU 4.89%) would live and die as a search engine? The dot-com darling is undeniably China's champ when it comes to satisfying online queries, but these days Baidu seems to be making waves for anything but its signature search engine.

  • Most of the headlines through the past week and a half stem from Baidu's goal to be selling self-driving cars in the U.S. as soon as 2018. The Wall Street Journal interviewed its chief scientist for an article published on March 16 when the aspirations were made public. It's a lofty goal, especially when we're talking about the stateside market given Baidu's baby steps outside of its core Asian market.
  • ran a story on digital virtual assistants, playing up Baidu's Duer as one of three players worth watching. Duer rolled out in China late last year, bundled with its iconic search app.
  • Baidu is also turning heads for some of its asset-moving strategies. Whether it was spinning off its online travel business a couple of years ago or last month's development with two insiders proposing to take its money-losing streaming video site private in a deal that would send $2.25 billion in proceeds Baidu's way, the dot-com darling isn't afraid to shake up its portfolio.

Even Baidu's most recent quarterly report -- a strong showing that resulted in the stock moving 10% higher in a single day -- moved less because of strength in its search business and more because margins are actually starting to show signs of life as operations improve outside of its original business.

This doesn't mean that search isn't the primary driver at Baidu. It also doesn't mean that paid search isn't getting better. The gap between what advertisers are willing to pay for leads through mobile relative to desktop is improving, and that's a big deal for a company that continues to generate more of its revenue through smartphones instead of PCs. We've seen mobile go from 42% to 56% of Baidu's revenue over the past year alone. 

Advertisers are also spending more on Baidu to get the word out, too. Online marketing revenue climbed 27% during Baidu's latest quarter since the prior year's fourth quarter, even though the number of active marketers on the platform grew by a mere 6%. There could be concerns about decelerating adoption, but -- trust me -- the implications are a lot more favorable this way than if it would have been a 27% uptick in marketers translating into just a 6% increase in revenue. 

Baidu's defining business may not be the one making the headlines these days, but it's more than holding its own as it lets its other pet projects play out. 

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Baidu. 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.

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