Sunday, October 28, 2012

Baidu.com, Inc. (NASDAQ:BIDU) needs to watch out for Qihoo 360 (QIHU)

Baidu.com, Inc. (ADR)(NASDAQ:BIDU), which operates China's largest search engine, will report its third quarter results on Monday.

The general consensus for the results is earnings at $1.28 a share, revenues at $998 million and earnings guidance for the fourth quarter at $1.03 billion.

According to Jiang Zhang writing in Seeking Alpha, investors need to watch out for what recent entrant and competitor Qihoo is doing and mobile monetisation.

U.S.-based Qihoo 360 Technology Co Ltd(NYSE:QIHU) entered the Chinese search engine market in the middle of August and straightaway shook up the market, giving a huge fright to entrenched player, Baidu.

What Qihoo has done to the market can be gauged from the fact in the slightly more than two  months the company has managed to grab a 10 percent share of the search engine market, while the share of Baidu has dipped to 81 percent from 86 percent.

Baidu still remains the market leader and is unlikely to be dethroned any time soon, but there is no doubt that Qihoo is gaining in popularity and Baidu needs to take the threat seriously.

"In my view, Baidu should focus on improving user experience in order to fend off Qihoo," commented Zhang.

Baidu has the first mover advantage of having an advanced search engine and strong user experience. It should build on that lead and ensure that it always stays ahead with more research and innovating on search-related products.

Like Google, Baidu also faces the challenge of improving its ad revenues from mobile ads. At present mobile revenues contribute only about 3 percent of total revenues. It has to use all the methods in its arsenal such as cloud computing, mobile OS, apps and so on to increase mobile monetisation.

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