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Search challenger Baidu cashes in on Google’s little local difficulties in China

Search is the foundation of Google’s vast fortune and, reviewing the usual suspects, there is nobody really challenging that. Microsoft has done well with its new improved Bing but Google still has 70 per cent or so of the huge US market and more elsewhere.

The only blot on its search horizon is China where the Government has fallen out with it over what Google sees as censorship and the Chinese see as business as usual.

But the dispute has done China’s home-grown rival Baidu no end of good as this report from Associated Press on its latest results indicates:

‘Baidu Inc., which operates China’s leading search engine, said Friday its third-quarter net profit more than doubled and revenue jumped 76 per cent as online advertising surged.

The Beijing-based company said it earned 1.05 billion yuan (US$156.4 million), or 3.01 yuan (45 cents), per American Depositary share, versus 492.9 million yuan, or 1.41 yuan per share, in the same period a year earlier.
Revenue rose to 2.26 billion yuan ($337.2 million). Analysts expected $333.6 million.

Baidu has gained market share following Google Inc.’s decision to close its China-based search engine in March but most of its revenue gain appeared to come from the market’s rapid growth rather than expanded share.

Excluding expenses for employees’ stock-based compensation, the company earned 46 cents per share. Analysts had expected 42 cents per share.

“Strong execution on our initiatives to expand our customer base and enhance customer service drove another quarter of strong results,” Baidu CEO Robin Li said in a statement.

Baidu’s market share rose to 73 per cent in the quarter ending in September, up from 64 per cent in the first three months of the year, according to Analysys International, a Beijing research firm.

Google, which still attracts Chinese users to its Hong Kong-based Chinese-language search engine, saw its share fall to 21.6 per cent from 30.9 per cent.

China’s search market grew 57 per cent over a year earlier to 3.15 billion yuan ($460 million) in the third quarter, according to Analysys. China’s population of Internet users is the world’s biggest and is still growing fast, rising by 36 million over the first half of the year to 420 million as of June 30.

For the fourth quarter, Baidu said it expects revenue to increase 88 per cent to 93.5 per cent over last year to 2.37 billion yuan ($354.2 million) to 2.44 billion ($364.7 million). Analysts were expecting $349 million.

Baidu’s U.S.-traded shares rose 54 cents to $103.02 in extended trading Thursday, after the results were reported. The shares had risen $2.47, or 2.5 per cent, to finish the regular trading session at $102.48.’

The numbers are still small of course but the Chinese market is so huge, in online as in just about everything else, that a market-leading position in China could very easily translate into global leadership in ten years or less.

Which will be a source of worry in Google Towers as it seeks to conquer the worlds of advertising, wind farms and driverless cars as well as running its core business.
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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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