Monday, December 31, 2007

Final ruling on record companies' lawsuit

"But the People's High Court of Beijing said in
its final rule Sunday that Baidu's service does
not constitute an infringement."

Note that of the 7 labels, EMI and Golden Label
pulled out of the lawsuit while in appeal stage,
and have deals with Baidu.

Xinhua report

Video search growing fast in China

Growth rate accelerated month-over-month from 16 to 17%
in November. Baidu has most of the pie. Most people use
search engines to search for video, not search provided
by the video provider.

Iresearch report

JP Morgan reiterates bullishness on Baidu...

in the wake of Shawn's death. Price target of $400, rating
'buy'. Dick Wei, the Hong Kong based JPM analyst, commented:

"We remain positive of Baidu, the dominant market
leader in China's online search market, which is still in
an early growth stage," Wei said.

Marketwatch report on the JPM call

Saturday, December 29, 2007

Shawn Wang passed away...

BEIJING, Dec 29, 2007 /Xinhua-PRNewswire-FirstCall
via COMTEX News Network/ --, Inc. (Nasdaq: BIDU), the leading Chinese
language Internet search provider, today regretfully
announced that Shawn Wang, Baidu's Chief Financial Officer,
passed away on December 27, 2007 in an accident in China
during the Christmas holiday vacation.

"We are all completely shocked and deeply saddened by this
tragic news," said Robin Li, Baidu's Chairman and CEO. "Shawn's
leadership and vision helped transform Baidu into a leading US
public company, and his presence will be greatly missed. Shawn
was not only a tremendous leader within our company, but also a
wonderful friend to us all. We extend our deepest sympathy and
most sincere condolences to Shawn's family."

Under Mr. Wang's leadership, Baidu has built an effective
financial reporting system in compliance with the Sarbanes-Oxley
Act. His duties will be assumed on an interim basis by the
senior management team, including the senior finance personnel,
until a successor is appointed.

Mr. Wang joined Baidu as its chief financial officer in September
2004, helping lead the company through its successful initial
public offering on NASDAQ in August 2005, and through its recent
inclusion in the NASDAQ-100; making Baidu the first company
from China to be included in the index. He was named
"CFO of the Year" by CFO Magazine in 2005.

Monday, December 24, 2007

Official reaction to the IFPI MP3 ruling is an official government publication. As
per them:

" The real reason of Yahoo! China's failure was not
because the website provides illegal MP3 downloading
links but because it did not immediately delete these
links after the record companies voiced their complaints
against its IPR infringement acts. This was against the
principles set up by the authorities."

So search engines have to delete links after music
companies complain of specific illegal ones, but
search companies are not required to police the
links proactively. Will gradually erode the dominance
of pirated music, without a major disruption to existing

The full article

Sunday, December 23, 2007

MP3 traffic on Baidu steadily down in Q2 2007

With the recent ruling on MP3 copyright issues,
how blocking illegal downloads affects
Baidu has become important. As of Q2 2007, MP3
traffic was about 22% of overall traffic for
Baidu, as per iResearch (the company doesn't
release official stats). Alexa has the number
much lower at 8%, but isn't a reliable source
for China. Note MP3 traffic is going down not
just as a fraction of total traffic, but in
absolute terms as well.

The company has multiple choices now - fight it
out in the courts if sued again, and pay a paltry
fine the first time, if found guilty, and at the
same time strike licencing deals with music labels
pushing them into an ad-driven model. They already
have deals with EMI and Rock Music. Since these
cases take at least a year to get anywhere, most
likely nothing drastic is going to change now. The
company will probably reduce its MP3 dependence to
single digit percentage by the time the issue heats
up again.

iResearch stats

Baidu launches patent search.

Baidu is partnering with the government patent agency
to provide full patent search. The Chinese government
is encouraging new patents, which means patent search
volume will increase significantly as the country

Baidu 's patent search

Saturday, December 22, 2007

IFPI loses music piracy case against Baidu...

A 2 year old lawsuit finally set to rest. Two
labels - EMI and Golden Label - have withdrawn
from the suit. Another major Chinese label - Rock -
has partnered with Baidu on an ad-driven model,
to replace the pay-for-download model.
Baidu wins lawsuit, but Yahoo loses.

Friday, December 21, 2007

Analyst position summary at 2007 end

Here is what the major analysts have to say about Baidu:

Citi (Jason Breuschke): Buy ($420-odd target)
RBC Capital Markets : Hold ($420-odd target)
Susquehanna Financial (Ming Zhao): Buy (no target)
JP Morgan (Dick Wei): Buy ($400 target)
Piper Jaffray (Gene Munster): Buy
Bear Stearns: Buy (withdrew target numbers)

Goldman Sachs (Anthony Noto): Neutral ($310-odd target)
Maintained this for over 2 years.

Credit Suisse (Wallace Cheung): Underperform
Maintained this for over 2 years.

Morgan Stanley (Richard Ji): No opinion for way too long.
Recent bullish note on the Huawei joint research lab, but
no comments on the stock per-se for at least a year.

Summary report from "First Call" for 2008 and 2009
First Call report on Baidu

China 2010 Online Advertising Alliance Revenue (mostly Baidu Union) to Hit CNY1bn

BEIJING, Dec 21, 2007 (SinoCast via COMTEX)

The Chinese online advertising alliance sector is estimated to
gain revenue of CNY 1.06 billion in 2010, soaring 61.2% from
CNY 660 million in 2006, according to a latest report by
Beijing-based iResearch Consulting Group.

The revenue would amount to CNY 1.06 billion in 2007,
accounting for 10.5% of that of the country's online advertising
industry. The figure was 10.8% in 2006 and is anticipated to
rise to 11.6% in 2008. Thanks to the advent of the 2008 Beijing
Olympic Games, the sector is expected to show a speedy
growth in the following years, said the Beijing company.

Currently, the advertising alliance of Inc. (BIDU)
and the AdSense advertising platform of Google, Inc. (GOOG)
rank top among the domestic online advertising alliances by
members. Some medium-sized advertising alliances grab a
piece of the market by unique positioning.

Among all the advertising alliances, sponsored search
alliances have a best performance, gaining revenue of
CNY 760 in 2007 which accounts for 70% of the total.

Thursday, December 20, 2007

Baidu & Huawei joint research lab

Baidu CFO estimates traffic will grow at 3x pace for the next
few years. Trying out new technologies to scale at that speed.