Thursday, January 31, 2008

iResearch says Baidu 2007 revenue at high end

China's search market expected to surpass
Japan by 2011, hitting 10 billion Yuan.
Yahoo Japan is valued at 23 billion
dollars. The report says we will get 76%
growth this year, and the number will hit
10 billion Yuan by end of 2010.

For 2007, iResearch estimates 2.9 billion
Yuan, with Baidu at around 60% in market
share. 2.9 billion * 60% is 1.769 billion
Yuan. Converting to dollars at today's
rate, we get 246.282 million dollars, right
at the high end of analyst estimates.

China org daily

Direct effects of the blizzard on Baidu

As per Xinhua:

As of January 28, China Telecom's
winter loss was being estimated at
RMB56.9 million with 3.14 million
households affected by 5,681
out-of-service network locations
in South China, according to the
report. China Netcom is facing a
RMB3 million loss from problems
affecting 66,000 households.

That is a total of 3.2 million
landlines. China's net population
is 210 million, of which about 73%
surf from home (CNNIC 20th survey).
That is about 150 million users.
The 3.2 million affected would be
around 2% of the total. Assuming
their outage lasts 9 days, that is
10% of their total usage in a
quarter of 90 days. 2% x 10% = 0.2%
Mobile services have been hit worse,
but Internet wireless traffic is
not significant in numbers.

The net direct effect should be around
0.2% for the quarter. The indirect
effect is harder to quantify.

Wednesday, January 30, 2008

Baidu releases report on mobile phone brands

Baidu is using its vast search, Baidu space,
Zhidao and Baike databases to release research
reports on various topics. The latest is on
the mobile phone industry (China manufactures
most of the components used in the mobile
industry, is the world's largest mobile phone
market, and its second fastest growing mobile

It is unclear how they plan to make money off
these reports. Clearly there is a market, since
their database is extensive and spans the entire

The link below is a machine translation of the
report's highlights:
Baidu's mobile report highlights [auto translated]

Tuesday, January 29, 2008

Baidu Japan CEO to be Japanese

says Robin Li. Should be someone who
has moved up the management ranks in
Japan, young, not necessarily from
the Internet world or from a competitor.

Baidu space 4th ranked

First is Tencent's QQ. Then,, Baidu Space, Sina, with
Sohu at 7th. Blogging increased 62.5%
in 2007.

From the 2007 Study of Chinese Virtual
Spaces and Communities (Blogs) released
by searchlab (, founded
by Baidu and Beijing University.

Robin Li to report his 16% separately

Mostly owned through a corporation, Handsome
Rewards Limited, of which he is the sole owner
and director. His wife has 4.97% which has now
been separated out. That means Li isn't required
to report that anymore - in other words he is
free to sell upto 4.97% with no SEC notification,
and no way of us knowing.

The latest SEC filing
Previous 2/2007 filing

Monday, January 28, 2008

Robin Li's interview about the Japanese venture


1. Moving into Japan because:

* already have over 70% of China's market
* Japan is second-biggest economy
* Internet penetration there is over 70%
* Main players, Yahoo and Google, are
* Chinese and Japanese both use extended
character sets
* Chinese and Japaness both do not have
spaces between words, which makes
indexing quite different.
* Japan is just 3 hours by flight from
China (Beijing, I assume) making it
easy for employees to go back and forth.

2. General strategy
* Focus on users first. Not very many ads
initially to avoid distracting users.
* Focus on mobile search as well. Unlike in
China, Japan has high-speed, cheap mobile
data services.
* Use the Olympics as a good opening, since
Baidu with its major China presence has
an advantage there over Japanese search
* On IPR issues, follow the lead of Yahoo
and Google.

3. Main disadvantage
* General perception in Japan that Chinese
goods/services are shoddy, and that
US/European products are superior.

Sunday, January 27, 2008

Baidu launches Baidu Zhishi

With Zhishi, users create a content page with 3 columns of
information culled from Baidu Q&A (Zhidao) pages. Unlike
Baidu Baike, this is not a Wiki page. Content pages can be
created for all sorts of topics. Baidu's editors scan the
topics to limit liability.

This is similar to NHN Naver's model in S.Korea, where
they have most of the search market. Baidu is increasingly
looking at creating user-generated content on its various
channels to form a community within its own Internet domain.

Friday, January 25, 2008

Analyzing analysys estimates

Analysys has a mixed history with its estimates.
Here are their previous 3 estimates for 2007 in
the format

Quarter: Quarter under consideration
Total search: Total search revenue
Baidu share: Baidu's share (percentage share)
Baidu reported: Numbers actually reported later

Quarter: Q1 2007
Total search: RMB 492.8 million
Baidu share: RMB 280.90 million (57%)
Baidu reported: RMB 275.6 million

Quarter: Q2 2007
Total search: RMB 657.5 million
Baidu share: RMB 382.53 million (58.1%)
Baidu reported: RMB 401.3 million

Quarter: Q3 2007
Total search: RMB 824.5 million
Baidu share: RMB 498.82 million (60.5%)
Baidu reported: RMB 496.5 million

Yahoo China winding down

Senior industry analysts are calling
the current layoffs and restructuring
by China Yahoo and the shifting of
valuable business resources and
personnel to the Alibaba Group a
'blood transfusion' to both Alibaba
and Taobao, done so as to enhance
the profitability of the two
platforms. "China Yahoo has now been
cleared out and has basically
abandoned competing with Baidu and

Officially, Yahoo denies this.

Baidu's share in Q4 estimated at 60.1%

by Analysys International (same as Q3). Google
China estimated at 25.9%, a 2.2% increase from
Q3. Yahoo dropped to 9.6%. Total market estimated
to be RMB 946.6 million ($131.3 million).

That means Baidu had revenues of
$78.78 million, 3% over the average estimate.
Baidu's earnings report should tell us how
accurate Analysys is.

Thursday, January 24, 2008

Video sharing site got funding from Baidu

Company confirms the first round investment.
Total $5 million in April 2007 from DFJ
(Draper Fisher Jurveston, who provided seed
capital to Baidu as well), ePlanet ventures,
two other funds, and Baidu. They have already
made RMB 25 million in 2007.

Ku6 already has cooperative ties with Baidu,
Netease, Sina, and Blizzard, with a strategic
cooperation established with the former two,
plus, strategic video cooperation with CCTV's
film channel, Hubei TV, China Entertainment TV
(CETV), and Dragon TV. Ku6 recently allied
with Microsoft to hold an original video

The new online video regulations could affect
Ku6, but they are the most local of the
various players (tudou, youku, and

Baidu recruiting more in Japan and China

They have started in Japan with 30

[Report from Beijing Times quoting
Robin Li]

Baidu releases new site with law info

Baidu Zhidao (Q&A) and Baidu Baike
(encyclopedia) jointly released a new
law lecture site (Fa Lv Xue Tang) on
Baidu Zhidao on January 23. Pictorial
links to the law site appear on both
channels. Baidu is giving away prizes
to Internet users that post their
legal knowledge on the site from
January 23 to February 4.

Wednesday, January 23, 2008

Analysts: Credit Suisse raises price target to $235; keeps 'underperform'

CS has had an underperform rating on the stock ever since
they began coverage almost 2 years ago. They have stuck to
their rating, as the stock has climbed 4 to 5 times off
the low of $60.

Baidu partners with Epin Media

Beijing-based in-train media provider
Epin Media Company announced on January
23 that it has entered into a strategic
partnership with Baidu (Nasdaq: BIDU)
for new media fields. The announcement
did not provide any details on the
cooperation. Epin's in-train LCD
screens had reached an audience of
600 million travelers across more
than 500 cities by the end of 2007.
Former News Corp's Star Group
China senior vice president
Jia Xiaojia is the COO of Epin Media.

[Reported by Pacific Epoch]

Baidu has 94% of Internet Cafe users

The newly released '2007 Report on the
Development of China's Internet Care
Industry' by WBZOL and found
that Baidu (Nasdaq: BIDU) was the clear
favorite of China's internet cafe users,
with 94% of respondents choosing it.
34% of internet cafes set the search
engine as the default Internet Explorer

The study found that gaming,
entertainment, and socializing
featured strongly among internet cafe
users' main reasons for going online.
Internet cafes have taken on some
aspects of entertainment venues, and
Baidu - in addition to regular web
searching - offers Baidu Post Bar, MP3
search, and Baidu Knows, among other
services, creating a solid foundation
for its popularity with users.

[report from Marbridge Daily]

Analysts: Merrill Lynch initiates coverage with buy - $430

Analyst: Eddie Leung

The target, $430, is close to the highest on the
street ($435 from Piper Jaffray).

Tuesday, January 22, 2008

Baidu post bar users cross 10 million

Baidu Post Bar now has more than two million
forums frequented by over 10 million registered
users, reports quoting a Baidu
executive. Baidu recently replaced the forum
channel's English domain name
with its pinyin equivalent,
with forwarded to the new

Analysts: Citi downgrades Baidu to hold

Citi downgrades (Nasdaq: BIDU) from
Buy to Hold. Price target dropped from $425
to $350.

Citi analyst says, "Increasing competition
from the Alibaba Group might trim rev. growth
by year end. Another concern is the magnitude
and timing of possible capex for Baidu to
enter China's C2C market, as well as its
spending for the Japan ramp-up. Despite a
recent pullback in the shares and our
expectations for a solid 4Q07, we will be
more comfortable with the risk/reward when
we get greater clarity on these issues."

Monday, January 21, 2008

Analysts: Zacks upgrades Baidu to Buy

Mostly based on valuation, excellent
market share, and great growth
The Zacks report

Sunday, January 20, 2008

Analysts: S&P reiterates hold and target of $400

This time bullish on Baidu's prospects.
Credit Lyonnais (CLSA) calls them a buy
as well.
The entire S&P report

Friday, January 18, 2008

China's GDP not export-driven: Carnegie report

A comprehensive report from Albert
Keidel of the Carnegie Endowment and
the World Bank. Highlights:

1. China's GDP has grown steadily at
an average of 10% from 1978.

2. The growth rate has followed cycles
of fast growth and then slow growth,
with the current cycle of fast growth
having started in 2001.

3. Fast growth has, in the past, led to
inflation and increase in money supply.
The government then used to reduce
cash flow and credit with measures like
raising deposit and lending rates, and
with price freezes. This led to inflation
going down, but also growth slowing for
2/3 years on average

4. In the current cycle, the government
already tamed inflation once in 2004 by
cutting money supply, but without reducing

5. Historically the government has
intervened when inflation was in the
high single digits. In this cycle,
they have been intervening early to
prevent cycle formation, and to
keep growth steady. The last
intervention worked. The current one
is still in progress.

6. The growth is driven by domestic
investment and consumption, not by
net exports (trade surpluses).

7. Rural areas have been hit in the
past slow growth cycles because of
pressures to plant grain (which has
lower profits) than higher-profit
crops. China emphasizes grain
self sufficiency to protect against
embargo pressure in the event of

China's Economic Fluctuations report

Thursday, January 17, 2008

Baidu becomes a .cn domain name registrar

That means they can allot domain names to
users and companies. They applied in
September 2007. Alibaba and Sohu were
also approved. The idea is probably to
let users host their own domains for
C2C (selling/buying stuff online) and
also for forming communities (say a
chat website).

Baidu/CERNET tie-up to create a new service

Baidu will cooperate with the China Education
Research Network (CERNET) to cover more than
95% of colleges and universities - with around
20 million computers - and create a new
social networking service (SNS). The service
will utilize the existing "Baidu Knows",
"Baidu Post Bar", and other community
platforms to create a new SNS.

[Report from China Business News 1/17/08]

Wednesday, January 16, 2008

Baidu encyclopedia crosses 1 million entries

The English Wikipedia has around 2.14 million
entries. Baidu Baike began in April 2006, and
from all accounts, should overtake Wikipedia

There have been rumblings within Wikipedia
at the clear signs of them becoming the
second-best. They claim Baidu stole their
content. Which is odd since those who contribute
to Wikipedia do so under the belief information
should be free, not paid for, or locked up,
either by Britannica or Wikipedia.

[Report from]

Baidu to take 10% share in Japan - Robin Li is aiming at 10% market share in
Japan in its first stage, as per the CEO
Yanhong Li. Baidu plans to launch the
Japanese site officially on Jan 23, with new
channels on travel and restaurant search.

(Report from Southern Metropolitan News,

China's net population at 210 million

According to statistics from the China
Internet Network Information Center (CNNIC),
China's netizens had reached 210 million by
December 2007, an increase of 73 mln
year-on-year, and 48 mln more than the number
in H1 2007. Internet penetration has reached 16%
of the overall population. In addition, broadband
subscribers have reached 163 mln and wireless
Internet users have reached 50.4 million.

The current growth rate of 50% cannot be
sustained. I doubt a country of 1.3 billion
can get all its citizens on the Internet in
another 5 years, which is what a growth of
50% compounded would do. To get
a better picture of how this affects Baidu,
we need to wait for numbers on growth rate
for Internet searches.

Saturday, January 12, 2008

Baidu launches entertainment channel

Baidu Yule. The channel is a set of websites which
aggregates news, images, etc from Baidu's search
database, for specific stars, movies, and so on.
The interesting thing is many of the webpages are
autogenerated with an algorithm. Looking at a
page, it seems the algorithm, given a star's name,
trawls Baidu's database to locate his movies,
popular photos, and so, and collects them together
to create a page, the way a fan site would.

Friday, January 11, 2008

The full JP Morgan Internet Report

The sections relevant to Baidu are pp 99-117
and pp 267-271. Those sections have been authored
by Dick Wei.

Some minor criticism:

1. Number of searches per day expected to go
from 295 million to 357 million, a growth
of 20%. I consider that a heavy underestimate
- the US rate was about 25% in 2007, with far
fewer newer users. The Chinese government
is focused on spreading Internet use, and
their cooling measures won't affect it.

2. The number of Internet users is estimated to
be 195 million at the end of 2008. Another
major underestimate, since the number is
already at 182, and expected to grow to 244
million by end 2008 by the semi-government
Internet Society of China (ISC).

3. JPM's estimate for Baidu's Q4 07 results is
right at the low end of all analysts. ISC has
it right at the high end.

JP Morgan Internet report

Google China's wireless search in trouble

Google's SMS-based mobile search service has not worked for
almost 2 months now. Rumors are China Mobile is not getting
along with Google China.

Marbridge report

Baidu to spend $15m next year on Japan

First 3 quarters of 07 they spent $6.5m. Total should have
been around $9m in 07. Next year's spending is about
50 cents a share.

Shanghai Dialy report

Tuesday, January 8, 2008

Baidu expected to hit high end of Q4 07 estimate

At 2007 end, China had 182 million users.
Search ad revenue was at 2.87 billion Yuan
last year. Assuming Baidu has 61% revenue share,
that translates to net revenue of $241.02 million
for 2008.

(2.87 billion yuan / 7.264 yuan-per-dollar
x 0.61) = $241.02 million

That is close to the highest estimate
on the street, $241.89 million dollars. There
is upside to my estimate, since 61% market share
for all of 2007 is conservative - Baidu has been
steadily increasing share.

Search revenue is expected to grow 81% this year,
and currency future traders are betting on the
Yuan appreciating 8 to 10%. That totals to an EPS
rise of almost 100% in 2008, even if margins just
stay the same.

Summary of Internet Society of China report

Saturday, January 5, 2008

Analysys estimate for China search market in 2010

They predict a growth rate of 30.1% for the market, way below
everybody else, and almost half of JPM's more recent report.

Analysys International, the leading advisor of
technology, media and telecom (TMT) industries in China,
says in its recently released report "China Search Engine
Market Forecast 2006 -- 2010", that China’s search engine
providers’ revenue will reach RMB 4.521 billion in 2010
and from 2006 to 2010, the compound annual growth rate
of the revenue is expected to be 30.31%. The first main
factor that promotes the development of China’s search
engine market is the increasing number of the netizens,
especially netizens who use search engine. Moreover,
a large number of the small and medium sized enterprises
have come to realize the marketing value of the search
engine market. It is expected that in the next five
years, the number of companies who launch their
advertisements through search engine will increase
at an annual rate of 17%.

Analysis report

Analysts: JP Morgan estimates for China search market

Per JP Morgan (comments in [] brackets mine):

- PPC search market enjoys a higher [...than overall
online ad market...] growth rate of 82% to $562 million.
Baidu will remain dominant player to take around 65-70%
market share.

China Search Ads Forecasts compiled by Imran Khan
and his team at JPM. [The average estimates of 15
analysts, on, are much higher]

2007 2008 2009 2010 2011
Avg Internet
users (millions) 168 195 217 234 253

Searches 119 145 169 190 214

Click thru rate 24% 26% 27% 28% 28%

Price per clik 0.40 0.47 0.55 0.62 0.69

Market size 309 562 911 1384 2046
(Million dollars)

Growth 120% 82% 62% 52% 48%

Analysts: Piper raises price target to Street's highest

Piper Jaffray boosted their price target on
from $374 to $439 after introducing 2009 EPS estimates,
reiterating their Buy rating.

Piper analyst Gene Munster, said, "the official launch
of Baidu Japan is now expected before Chinese New
Year (Feb 8). Previously the Street was expecting this
launch by the end of the Dec quarter."

Wednesday, January 2, 2008

Analysts: S&P reiterates hold and target of $400


BIDU; $398.87 announces its CFO Shawn Wang tragically
passed away on December 27, in an accident in China
during a holiday vacation. Wang joined in
Sep. 2004, and we think contributed notably to the
company's success.'s most recently filed
20-F identified Wang as critically important to the
company, and potentially very difficult to replace.
In our view, Wang's loss is a notable negative,
especially given its suddenness. Nonetheless, we
believe will remain the leader in Chinese
Internet search. We maintain our 12-month target
price at $400. /S. Kessler

Tuesday, January 1, 2008

Shawn's death not a strategic blow for Baidu

"Wang's job was more financial related than strategic
related and the company's everyday operations are led
by other senior managers," said Liu Bin, chief analyst
at research firm BDA China. "Although it is a personal
tragedy, I don't think Baidu without Wang will be less
capable in terms of competing with its competitors."

The Xinhua News Agency reported on Monday that
Wang was killed in a swimming accident when he
was on vacation in Sanya, a popular seaside resort
on the southern tip of Hainan island.

China Daily article