Thursday, April 30, 2009

Baidu not closing client software department

Baidu Vice President of Products Yu Jun called
rumors that the company had decided to close
its client-end software department "sheer fabrication"
in an internal email sent Wednesday afternoon to
executives, public relations and the department in
question, reports Baidu will not close or
downsize the client-end department or merge its
business into other company units, said Yu's email.

Reports earlier this week quoted a Baidu insider as
saying that the department was performing below
expectations and some core staff had resigned ahead
of its closure. Vice President Yu Jun is expected to
step down in late June 2009 for personal reasons.

Credit Suisse repeats, third year running, that Baidu will lose market share

Credit Suisse analyst Wallace Cheung says Baidu's
dominance will start to slip in the next few years,
at the hands of Google and e-commerce site Taobao.
In a report issued today, Cheung says Baidu’s share
will drop from 59 percent in 2008 to 55 percent in
2009 and 51 percent in 2010. Meanwhile Google’s
share increases from 23 percent in 2008 to
33 percent, and Taobao’s share runs from 1 percent
to 11 percent. Cheung offers a couple reasons for the
changes in market share, which is after the jump.
Google will gain share from higher growth in search
traffic as it optimizes its service in China, forms
partnerships, and builds its salesforce, which is largely
seen as the best in the business. In addition, Google is
launching search products for music, mobile, and maps
this year.

Online shopping site Taobao should gain share because
Cheung points out that most Chinese don’t use search
engines as their primary shopping source. In fact,
44 percent of respondents in a survey performed by
Credit Suisse said they used Taobao rather than a search
engine for their shopping needs. Only 22 percent said
they used Baidu. Over the next few years Cheung believes
this will grow as Taobao bolsters its offerings.

Wednesday, April 29, 2009

Susquehanna on Baidu Q1

BAIDU reported first-quarter revenue and earnings
per share above guidance and our forecasts. While
operating margin was lower in the first quarter, it will
rebound to a normal level in the second quarter through
the fourth quarter. Management guided second-quarter
revenue to rise 32%-36% sequentially, even better than
our forecast of 30%, thanks to rising economic activities
and user traffic after the Chinese New Year. We maintain
our Positive rating on Baidu shares and slightly raise our
price target to $260 from $250.

Tuesday, April 28, 2009

Analyst take on Q1 2009

  • Pali Research analyst Tian Hou
  • today upgraded the stock to Neutral from Sell,
    noting that with the company’s launch of its
    Phoenix Next advertising system, “BIDU is
    making a proactive change to eventually migrate
    from its current model to a Google-like model,”
    Hou writes. “We view this as a significant step to
    reduce the risk associated with its current model,”
    which features an unclear mix of paid and natural
    search results. Hou also notes that Baidu spent
    heavily on advertising on China Central TV’s
    Chinese New Year gala, in what the analyst views
    as “a peace offering.” CCTV had previously run a
    series of reports on questionable business practices
    on the site.

  • Needham’s Mary May this morning likewise
  • upped the rating to Hold from Sell. “Trends
    suggest that conditions have improved significantly
    over the past several months, and at least for now
    advertiser activity is on the mend,” May writes. May
    adds that “it appears as though some of the
    regulatory challenges the firm faced during the past
    several months is behind us, and management will
    be able to focus on running the company.”

  • Bank of America/Merrill Lynch analyst Eddie
  • Leung today repeated his Buy rating on the stock,
    while boosting his target price to $258, from $147.
    He writes that the rollout of the Phoenix Next keyword
    bidding and matching system “appears to be smooth.”

  • Piper Jaffray analyst Gene Munster likewise
  • repeated his Buy rating and upped his target to
    $250 from $246, asserting that “shares of BIDU will
    trend higher given March results and June guidance
    indicate fundamentals are intact and China search
    opportunity remains in its early stage.”

  • Bernstein Research analyst Jeffrey Lindsay
  • repeated his Outperform rating and upped his target
    to $260, from $230. “We think the growth trajectory
    for Baidu is still higher than many expected at this
    point,” he writes. Lindsay also writes that the
    company is “more than holding share against Google,”
    and that both of them are mopping up against other
    China paid search sites.

  • By contrast, UBS analyst Wenlin Li today
  • repeated his Sell rating and $150 price target.
    Li assets that there were some issues with the quarter,
    in particular lower gross margins and rising traffic
    acquisition costs. Li also contends that Phoenix Nest is
    likely to be earnings dilutive in the short term, and that
    the impact on fundamentals will depend on how long it
    takes to transition to the new system.

Deutsche bank ups target to $241

Deutsche Bank maintains a 'Buy' on
price target raised to $241.

Deutsche analyst says, "We lift 09 EPS to US$6.61
from US$6.27, mainly due to positive 2Q guidance of
33-37% YoY vs. our 27%. We raise 3Q and 4Q
forecasts accordingly. As a result, we raise our
09 YoY rev growth estimate from 34% to 46%...
We raise 08-11 CAGR from 32.8% to 36.4%. The
positive 09 outlook drives better rev growth in
2010, given likelihood of macro rebound in 2010.
Our base case scenario assumes 19% advertiser
growth from 2008-2011 (0.6% penetration of total
SMEs/42% of SMEs w/websites). Blue Sky scenario
analysis assuming an advertiser growth of 48% for
the same period (1.2%/80%) leads us to a hypothetical
valuation of US$432."

Monday, April 27, 2009

Price targets being raised

Goldman: $273 from $212 (DCF and P/E to normalized
growth) to reflect more confidence in higher estimates.
At $273, shares would trade at 30X 2010E EPS of $9.10
and 42X 2009E EPS of $6.50.

Piper Jaffray raises to $246.

JP Morgan comments:

Strong 2Q09 revenue guidance:
Baidu guides 2Q09 revenue of Rmb 1070M to Rmb 1100 M
(US$157M to US$161M), or up 32%-36% QoQ, and
up 33%-37% YoY. Guidance is ahead of consensus
numbers of US$144.1M, and our recently revised up
forecast of US$157.8M.

Offering $1.5 million ad dollars to SMEs

Baidu announced on April 26 that it is to offer
RMB 10 million ($1.5 million) of advertising on
its platform to small and medium-sized
enterprises (SMEs) in May to encourage their
use of its platform as a marketing tool.

HC integrates search for SMEs

HC International's business-to-business (B2B)
e-commerce site plans to invest
RMB 20 million in its "Chun Hui" plan to support
e-commerce among small and medium-sized
enterprises (SMEs), reports The
plan integrates B2B e-commerce and search and
will offer SMEs free promotions on search engines,
initially Baidu and Google, said the report.

Friday, April 24, 2009

Slew of upgrades/PT raises: RBC, Bernstein, Sterne Agee

Ests and tgt raised to $252 at RBC ahead of earnings.
RBC Capital notes Baidu is set to report its 1Q09 after
market close on April 27. RBC raised their FY09 revenue
and pro forma EPS estimates to $643 mln and $5.78 from
$623 mln/5.69 vs consensus of $602 mln/$5.59. Post weak
trends around Chinese New Year, Baidu's customer behavior
seems to be following the well-trodden seasonal pattern of
a strong March setting the theme for 2Q and 3Q. They have
now entered the two seasonally strongest quarters for Baidu
and expect ests to head higher after the report. And as they
look forward beyond the very near term, firm believes BIDU
shares are set to continue to outperform as investors
eventually roll the calendar to use 2010 est, and as such, they
are introducing FY10 rev/EPS ests of $900 mln/$7.88 vs
consensus at $800 mln/$7.42. Target increases to $252 from
$186 on raised ests.

Bernstein reiterates outperform and keeps target price at

Sterne Agee reiterates buy and raises target price to $250.

Thursday, April 23, 2009

Travel channel in place

Baidu has launched a travel channel at, reports The
channel offers travel news, recommendations
for destinations and travel agencies, scenic
photos, a related search function and other
content, said the report.

Susquehanna, Pali research raise targets

Susquehanna raised its price target on Baidu
from $230 to $250, maintaining their Positive
rating on the stock, ahead of Q1 results on April 27.
The firm said the company could guide
Q2 revenues above RMB 1 bln for the first time.

The firm said, "Due to continued recovery post
Chinese New Year, we expect some small upside to
1Q results. We believe the focus will be on the
company's 2Q revenue guidance, which we think
will show 30%+ Q/Q growth. This should lead to
Baidu's quarterly revenue topping RMB 1 bln for
the first time in its history, and indicative of a
comeback in growth momentum."

Meanwhile Pali raised its target from $90 to $150,
and rating from "sell" to "underperform".

Wednesday, April 22, 2009

More on the lawsuit

More information is available on the monopoly lawsuit.
Baidu has been accused of abusing its dominant
position online to "punish" a company that cut
back spending on advertising with the Internet search engine. Tangshan Renren Information Service Company (TRISC)
said Baidu had "monopolized the Chinese search engine market",
demanding more than 1.1 million yuan ($160,000) in
compensation after one of its subsidiary websites was blacklisted.
It is believed to be the first case to deal with an alleged breach of
the Anti-Monopoly Law, which came into effect this month. The
suit opened at Beijing No. 1 Intermediate People's Court yesterday
but a verdict was still pending. TRISC claimed reports from
multiple sources prove Baidu has "more than half of total market
share" and said it exercised its power to eradicate the
competitiveness of the plaintiff's website, as well as impair market
dynamics. "After we lowered the amount we paid for Baidu's
advertisement service last May, Baidu punished us and coerced us
to reuse the service by doing so," a spokesman for TRISC told the
court. The number of visits to its website "dropped sharply" on
July 10 from 2,961 to 701. While a search for the company on the
US-based search engine Google found 6,690 pages, Baidu found
only four, he said. The promotion service offered by Baidu charges
enterprises to have their site moved up the results lists following a search.

Baidu refuted the monopoly allegations and said the so-called
"search engine market" does not even exist because there is no
pricing scheme involved in most searching activity. "Searching
services provided by our engine is free to Net users and
enterprises," responded Baidu, adding that a website can easily
exclude itself from being listed in search results by installing a
simple program. Baidu also questioned the figures provided by
TRISC, saying the reported increase in its usage was a "seasonal
phenomenon", and added that, "as a precedent of anti-monopoly
cases in Western courts, companies are normally investigated for
two years". Competition among fast-emerging search engines is
also tight and users easily switch between them, it said. The
Internet firm also said it had blocked the TRISC site because the
firm had cheated and created illegally links to increase hits for its
website. "Search engines are dedicated to providing the best
experience free of charge," it said, adding that it was "normal in
the industry" to crack down on such sites. Baidu ruled out TRISC's
proposal for an out-of-court settlement on condition that the
defendant compensates its "losses".

Beta version of Aladdin launched

Baidu has launched a beta version of its "Aladdin"
search platform at and, according to Sina and DoNews
reports. Users need to register a new account to
join the open platform. Aladdin partners do not
receive payment or pay a service fee, said the
Sina report.

Aladdin is an enhanced search platform that will
grab data from currently inaccessible "deep web"
sites, Baidu CEO Robin Li said at a ceremony last
December. Company CTO Yinan Li said that more
than half of the company's 2,000 core engineers
were working on the platform, originally slated for
release in January 2009.

Baidu online pay system in tie up with one more bank, an online payment platform under
Baidu, inked a cooperation agreement with China
Everbright Bank, enabling its registered users to
recharge accounts and make payment at outlets
of the Beijing-headquartered lender. Thus far, partnerships with 17 banks,
such as Industrial and Commercial Bank of China,
Agricultural Bank of China, China Merchants Bank,
China Construction Bank, China CITIC Bank,
Bank of Communications, Postal Savings Bank of China,
Industrial Bank, and China Minsheng Banking. Since
its inception, has been gaining a robust
growth in registered users. Thanks to a promotional
activity in recent days, the number of its daily
registration jumped nearly 20%. Now, the online
payment tool is popular with more users.

Citi, JPM ups targets

Baidu shares have received a lift from J.P. Morgan
analyst Dick Wei, who this afternoon upped his price
target to $265 from $190. He now sees GAAP EPS of
$5.67 a share in 2009, and $8.35 in 2010. That’s
above the consensus at $5.48 and $7.34, respectively.
Wei writes that recent data points suggest that Baidu’s
search traffic was strong in Q1 and into early April. He
also says more small- and medium-sized businesses are
turning to Baidu to search advertising “due to its high
effectiveness.” And he asserts China’s macro outlook
“will remain stable in the near term.” Wei maintains his
Overweight rating on the stock.

Citi raised its target to $245 and Credit Suisse to $180.

Monday, April 20, 2009

Baidu Tieba adds private group

Baidu has just launched a new feature,
called club, for its popular Tieba. Club is
much like a public tieba. But the master
of the club has more privacy controls. In
Baidu’s words, club is to provide a more
private communication place for special
interest groups, but it’s not going to affect
or compete with public tieba.

Although they look very similar and most probably
share the same back end system, they are
still different. A tieba is driven by a search keyword,
which becomes the name of the tieba. Most users
visit tieba through search. Users can post in tieba
without logging in. A club’s name doesn’t have to be
a search keyword. Members must login to post
content or probably view anything. Currently only
a selected group of tieba users have got privilege to
create clubs.

Robin Li: in talks with all 3 mobile carriers

Baidu is in talks with China Mobile to cooperate
on wireless search, reports Sina quoting Baidu CEO
Robin Li from the sidelines of the Boao Forum for
Asia, held from April 17-19 in Boao, Hainan province.
Li confirmed previous rumors that Baidu is also
negotiating with China Telecom and China Unicom,
said the report.

UBS reiterates sell with $150 target

The analyst believes there are a number of risks
that aren’t factored into the company’s share price,
including ad spending cuts, business model
transformation, increased competition from Google
and margin pressures from higher traffic acquisition

Friday, April 17, 2009

Lawsuit by a medical site

Tangshan Ren-Ren Information Services has
brought an antitrust suit against Baidu, to be
heard by the Beijing No.1 Intermediate People's
Court. Ren-Ren Information Services alleges that
its ‘Quanmin Medicine' site,, began
to see a sharp decrease in visitor numbers starting
July 10 of last year. Research by the company
showed a marked difference in the way Google and
Baidu had indexed its site: Google had 6,690 pages
from the site indexed; Baidu, only 4. The company
alleges that Baidu is blocking its site. As part of its suit,
Ren-Ren is seeking damages of RMB 1.1 mln and the
complete restoration of its pages to Baidu's index.

Startpage updated

Baidu’s startpage at has been updated.
The domain should be available since around April 1st.
It looks like iGoogle or any other startpage service, with
service widgets or RSS feeds attachable to the page,
organized into tabs. The tabs can be reordered via
drag and drop. There’re currently 55 modules
listed, including a calendar module. There’s also a music
module on the default page, from Qianqian, a popular
music player.

Online search ad spending picking up in China

The Chinese economy has recovered in recent
months, prompting Baidu's customers to spend
more on advertising, Robin Li, the firm's chairman
and chief executive officer, told reporters on the
sidelines of the Boao Forum. "Our data suggests
that the confidence of many consumers and companies
has been picking up rather rapidly since the Spring
Festival," said Li, referring to the start of the Chinese
Lunar New Year, which took place in late January this
year. The comments come after China posted this week
its slowest quarterly growth on record in the first three
months of 2008, while recent urban fixed-asset
investment and industrial output growth showed signs
that the economy may have hit bottom.

There are some 200,000 active online marketing
customers in various sectors running advertisements
on Baidu, most of which have seen encouraging signs of
business after the Spring Festival, Li said. Baidu's fourth
quarter net profit rose to $42.3 million, up 40 percent
from a year earlier, but fell short of Wall Street
expectations. Li also said the company's investment in
its Japanese language website would continue as
scheduled, unchanged by the economic downturn.
"For a market as big as Japan, it requires years of
patience to bear fruits," he said. The company aims to
have 70 percent of total revenue come from overseas
markets in 15 years, Li said.

Li added the focus of Baidu is to better organise resources
available on the Internet, including music files, rather
than becoming a music information provider.

Thursday, April 16, 2009

Launching mobile wireless search in Japan

Li Yinan, CTO, recently revealed during a
summit focused on mobile Internet that Baidu
plans to launch a mobile information search
platform this month in Japan. According to Li,
the launch is an important part of the company's
Japanese development strategy.

Wireless search optimization

Baidu is planning to improve users' wireless search
experience by traffic compression of web pages. This
is estimated to save 90% of traffic bandwidth for users
who use Baidu's wireless search function to get to a
site, when compared to accessing the site directly.

According to a technician from Baidu, the current sizes of
web pages are usually about 70 kilobytes to 80 kilobytes
and those of front pages may reach over 200 kilobytes.
However, with the transcoder technology of Baidu, the
sizes of these pages will be at about five kilobytes.

Tieup with online games company

"Wanba" gaming site and online game developer
Beijing Kylin Network Information Science and
Technology will work with Baidu on a new online
game entitled "Chinggis Khan" (Genghis Khan).
A spokesperson for Kylin confirmed the report,
but said he could not give any further details.
So far Baidu and Kylin have invested more than
RMB 4 mln into R&D on Chinggis Khan, which is
now in final closed beta and set to enter a limited
invitation-only beta later this month.

Saturday, April 11, 2009

Search and ecommerce to be integrated

Baidu plans to finish integrating its enhanced
"Aladdin" search platform and its consumer-focused
e-commerce platform in the second
quarter of 2009, reports quoting company
Business Department General Manger Li Mingyuan.
Baidu's Shanghai research and development center
released Aladdin on December 18, 2008.

YouA to include B2C

Li Mingyuan, general manager of e-commerce business
for Chinese online search firm Baidu, has stated that
Baidu's e-commerce platform "YouA" would enter the
B2C market in the future. According to Li, Baidu YouA
is an "X2C" platform rather than just a C2C platform.
B2C companies including Joyo-Amazon and Dangdang
are currently Baidu YouA clients, but Li stated that
a B2C platform from Baidu would not threaten its existing
B2C clients. Baidu YouA plans to offer integrated services
and search to aid in the display of products from the above
companies, with the condition that B2C enterprises conform
to Baidu's product regulations.

Thursday, April 9, 2009

Phoenix nest to be launched on April 20th

Baidu will formally launch the professional edition of
its new Internet search engine advertising program,
Phoenix Nest, on April 20, 2009.

Robin Li, chairman and CEO of Baidu, said Phoenix Nest
is only an upgraded edition of its former Baidu Bidding
Rank. Prior to this announcement, Baidu changed the
name of its Bidding Rank program to Baidu Promotion
on March 30, 2009, and the launch of Phoenix Nest is
the second step for the development of its Baidu
Promotion. According to Baidu's schedule for 2009,
the company will formally launch the professional edition
of its Baidu Promotion to all clients at the beginning of
April 2009; between April and June 2009, it will guide
its clients to use the search program; and in June 2009,
the company will assist its clients in transforming their
files in the classic edition to the professional edition.
Then the classic edition will be withdrawn from the market
and the professional edition will become the mainstream
product for search engine promotion services. Baidu Bidding
Rank is Baidu's advertising product that displays the
advertising websites on its search results pages.

Internet wireless ad space

Baidu will need to wait for at least two years
before its mobile Internet search service becomes
profitable, despite recently starting to sell advertising
space on the service, an analyst told Interfax on
April 9.

Tuesday, April 7, 2009

Youa promoting 100 best stores

Baidu's consumer-to-consumer e-commerce
platform has announced 60 of its
top 100 specialized stores, which were singled
out for quality, service, store design or growth
speed, reports The promotion is
divided into five phases, each featuring 20 stores,
said the report.

Senior's website - launched

New search site set up in late March that targets
the middle-aged and elderly, reports Sohu. The
product offers larger fonts and customized site
selections, like mp3 downloads of Chinese opera
and a floriculture forum.

Baidu post bar to be restructured

Yanhong Li recently published a blog post discussing
the selection of moderators on Baidu Post Bar, questioning
whether moderators should be elected, and what selection
criteria should be used during selection. Li stated that the
largest proportion of user feedback he receives is
concerning moderators. As Baidu Post Bar grows, so does
the power of moderators, leading to various issues involving
the quality of moderation, with some previous reports
suggesting that moderators are accepting "protection money"
for personal gain. On April 1, Baidu announced that Yu Jun,
company products president and founder of Baidu Post Bar,
would leave his post in June for personal reasons, leading to
speculation that Baidu Post Bar is undergoing restructuring.

Thursday, April 2, 2009

Baidu price target raised to $230 from $170

In a report on Baidu this morning, Bernstein Research
analyst Jeffrey Lindsay says, "This [Google music] is a
too-late gambit and (we) anticipate that Chinese users
will continue to utilize the Baidu service that they are
most familiar with." Lindsay expects Baidu's share of
the overall Chinese online advertising market to continue
to grow, reaching 37 percent in 2010. To back up his
argument, he notes that even in the face of several recent
scandals, including a government crackdown on
pornography and the removal of unlicensed
doctors and pharmacists from the search engine, Baidu's
share of the Chinese search market is once again on the
upswing, reaching 64 percent in February.

Switching to Phoenix nest ad system

Baidu renamed its Enterprise Marketing products
and services as Baidu Marketing Services on
March 30, according to company information. Baidu
Marketing Services consist of Search Marketing
Services and Network Marketing Services and can
be found at Enterprise Marketing's
previous domain name,, now links
directly to

According to an unnamed insider quoted by Sohu,
Baidu may release its new ad auction system
Phoenix Nest under the name of Search Marketing
Services Professional in early April and begin transferring
client information to the professional version in June. The
insider believes the March 30 name change is the first step
in the Phoenix Nest release. In its fourth quarter
2008 conference call, Baidu said Phoenix Nest would be
"broadly available" in the second quarter of 2009.

VP Yu Jun to resign

Unnamed sources say Vice President Yu Jun has
submitted a letter of resignation and will probably
leave to start his own business in June, reports An unnamed Baidu insider confirmed the
news, said the report. Yu joined Baidu in May 2001
and became chief product designer in September 2005,
said the report. Yu was promoted to vice president in
December 2006.

Yu refused to comment on the news, according to
another report. An internal email in mid-March
revealed Baidu's plans to divide its search product
marketing business into two departments, one of which
would have been led by Yu.