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One year ago in November, 2006 when Baidu (BIDU) was just $75 per share, we posted an analysis of BIDU takeover rumors.
At the time, BIDU had a P/E of about 100, and a market cap of about $3B.
Today BIDU has a market cap of just under $14B with a P/E of about 200 and a stock price of just over $400 per share. Earnings for the company have steadily doubled in the last several years. BIDU has more than quadrupled in price yet we at StockRumors.com still think that the potential takeover of BIDU is still very probable.
China's Internet Market
Once again, let us reiterate: The market for internet usage in the United States and in most of Europe has very little growth left. Few people in these countries do not have access to the internet or to modern search engines like Google. China, in 2006, had 137 Million internet users, a growth of 23% since last year. Compare this to the 208 Million in the United States, which represents a growth of 4% in the last year. The population of the United States is 301 Million, leaving a possible growth of about 33%, many of whom are too young or old to use the internet. In China, however, the population is estimated as of July 2007 to be over 1.3 Billion people. Internet users in China, therefore, have a possible growth of 1,000%.
The question, then, becomes: where will these people go once they have the internet? What search engine will they use?
The Search Engine Battle in China
The battle for the search engine market is raging in China. Baidu makes fun of their competition, and their competition frequently makes fun of Baidu. (See here for a recent example).
The market share is always tipping in favor of Baidu.com.
In 2006 it is estimated that Baidu averaged 52.3% of the search engine market share in China while Yahoo controlled about 15.7% and Google controlled 15.6%.
In the second quarter of 2007, Baidu controlled about 58.1% of all revenues generated by Chinese searches, with Google controlling about 22.8% and Yahoo only 11.6%.
Google, therefore, is growing in China along with Baidu. Yahoo is clearly losing market share along with others like Sohu and Sina. Google, therefore, is the only real competition that Baidu.com needs to worry about.
At the time, BIDU had a P/E of about 100, and a market cap of about $3B.
Today BIDU has a market cap of just under $14B with a P/E of about 200 and a stock price of just over $400 per share. Earnings for the company have steadily doubled in the last several years. BIDU has more than quadrupled in price yet we at StockRumors.com still think that the potential takeover of BIDU is still very probable.
China's Internet Market
Once again, let us reiterate: The market for internet usage in the United States and in most of Europe has very little growth left. Few people in these countries do not have access to the internet or to modern search engines like Google. China, in 2006, had 137 Million internet users, a growth of 23% since last year. Compare this to the 208 Million in the United States, which represents a growth of 4% in the last year. The population of the United States is 301 Million, leaving a possible growth of about 33%, many of whom are too young or old to use the internet. In China, however, the population is estimated as of July 2007 to be over 1.3 Billion people. Internet users in China, therefore, have a possible growth of 1,000%.
The question, then, becomes: where will these people go once they have the internet? What search engine will they use?
The Search Engine Battle in China
The battle for the search engine market is raging in China. Baidu makes fun of their competition, and their competition frequently makes fun of Baidu. (See here for a recent example).
The market share is always tipping in favor of Baidu.com.
In 2006 it is estimated that Baidu averaged 52.3% of the search engine market share in China while Yahoo controlled about 15.7% and Google controlled 15.6%.
In the second quarter of 2007, Baidu controlled about 58.1% of all revenues generated by Chinese searches, with Google controlling about 22.8% and Yahoo only 11.6%.
Google, therefore, is growing in China along with Baidu. Yahoo is clearly losing market share along with others like Sohu and Sina. Google, therefore, is the only real competition that Baidu.com needs to worry about.
Guide created: 02/02/08 (updated 02/26/08)
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