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Baidu's Biggest Competitors

By Kevin Chen – Nov 19, 2013 at 11:00PM

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You may know Qihoo 360 is Baidu's biggest competitor today, but you should also watch out for Sohu's -- it's grown formidable thanks a Tencent partnership.

Chinese Web giant Baidu (BIDU 0.44%) keeps hitting new 52-week highs, and some are worried that the stock could see a correction. While no one really knows what will happen, following Baidu's competitors can give you some insight. Here are Baidu's biggest competitors in the search space and beyond.

Source: Baidu.

1. A formidable Qihoo 360
Perhaps the search engine that's contributed most to Baidu's declining dominance is Qihoo 360 Technology (QIHU.DL).

Originally, I wasn't too worried about Qihoo 360. If you think about search from a product perspective, Qihoo 360 doesn't seem like it should be that powerful -- the company only has a year of data to make its search smart and relevant for users. Meanwhile, competitors like Sohu's (SOHU -1.82%) Sogou and Baidu have operated in China for a decade or more. That's a decade of data these companies can use to take Qihoo 360 out of the game.

However, you can't underplay the Qihoo 360 threat. In one year, the company has stolen market share from Baidu. It's now China's No. 2 search engine with 18.2% of the market. And with time, Qihoo 360 search will become smarter. In turn, Qihoo 360 may eventually increase its slice of the pie and steal lucrative advertising dollars from Baidu.

2. A strengthened Sohu
Currently, Baidu crushes Sohu in almost every single industry they compete in -- video, games, and search. However, there's reason to believe that Sohu could also turn the tide.

While Baidu's search market share has fallen over the past few years, Sohu's has grown. In August 2012, Sogou only had 2.9% market share; today, it has captured about 10.4%. Meanwhile, Baidu has fallen from about 80% to 63%. These numbers also show that, like Qihoo 360, Sogou's growth has been at the expense of Google and other smaller search engines in China.

However, the main reason Sogou may prove formidable is Tencent's (TCEHY 0.40%) recent $448 million investment. Now, Sogou has the capital needed to really take on China's 800-pound search gorilla. There's good reason to believe Tencent and Sohu's Sogou can do it. Beyond the fact that Tencent is a $100-billion-plus tech conglomerate with money to burn, just look at its Soso search engine. From August 2012 to today, Soso grew its market share from 1.4% to 3.6%. If they combined, Soso and Sogou would total 14% of the total market -- inching them closer to knocking Qihoo 360 out of the No. 2 spot.

Will Baidu crumble to Qihoo 360 and Sohu?
Given Baidu's core competence and huge dominance in search, it's unlikely that Sohu and Qihoo 360 can transform the market overnight. That said, if Qihoo 360 can hold fast and if the Sohu-Tencent partnership proves fruitful, you may see advertising dollars flow from Baidu to its biggest competitors.

Fool contributor Kevin Chen owns shares of Baidu. The Motley Fool recommends Baidu, Google, and The Motley Fool owns shares of Baidu and Google. 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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