Analysts have started questioning Chinese search
engine, Baidu.com, Inc. (ADR)(NASDAQ:BIDU) ‘s tactics to retain its market
share. On Tuesday, the company started redirecting search traffic from smaller
rival Qihoo to its own home page.
Baidu shares fell on Wednesday after an analyst
queried whether this strategy could backfire on the company. Shares in China's
biggest search engine fell 6 percent to $113.34, while that of Qihoo rose
nearly 3 percent to $22.18.
Baidu has about 80 percent of the search market share
in China but recent entrant Qihoo has started to trouble the company's
position.
On Tuesday the company resorted to guerrilla tactics
to counter the potential threat, provoking criticism from the analyst
fraternity. From Tuesday, those who put in a search query on Quito’s 360
Comprehensive Search Engine found that they were directed to Baidu's home page
where they had to type in the query all over again.
Stifel Nicolaus analyst George Askew said the tactic
could backfire on Baidu, and another analyst reduced her price target on the
Chinese search giant.
Qihoo launched its service on Aug 16 and since then
its shares have risen nearly 19 percent, while those of Baidu have fallen about
15 percent.
“By doing this, we believe Baidu is expecting that
users will identify Qihoo with a poor search experience, and bypass Qihoo
completely and begin searches at Baidu,” Askew said in a note. “However, the
risk is that Qihoo users simply select a different search engine within the
search category, and avoid Baidu.”
Askew, who expects the battles between Baidu and Qihoo
to get even nastier, has a buy rating on Qihoo with a target price of $31.
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