Friday, January 29, 2010

Recruiting for online video subsidiary

Baidu will recruit an estimated 350 employees for its
online video business by year end, said an insider with
the company's video subsidiary. The subsidiary currently
employs 50 staff, but the number will be increased as it
recruits more employees specialized in such fields as
technology, editing, marketing, copyright, and accounting,
added the insider. Baidu's video subsidiary is still under
preparation, occupied with purchasing copyrights and
seeking out business partners. According to the
subsidiary's strategy, it will focus on providing
high-quality online video products and offer free
video on demand (VOD) services. Besides, the
subsidiary's CEO earlier promised to divest it and
achieve an independent listing within five years.
(Source: Xinhua's China Economic Information Service
Edited by Zhu Zhu,

Thursday, January 28, 2010

Postbar linked with maps:

Users can enter search terms to see real-time results
for posts, with the querier's location plotted on Baidu
Maps. Baidu intends this to evolve into a real-time
search, with location filters.

[Source: Marbridge Daily]

Wednesday, January 27, 2010

Joint Venture with Japanese online retailer Rakuten

The deal calls for $50 million over 3 years in a combined
online website catering to both business buyers and retail
consumers. Rakuten, which operates Japan's largest
e-commerce retail site, will own 51% of the venture, and
Baidu 49%. The online mall is expected to be China's largest
when it goes online in the second half of this year.

Tuesday, January 26, 2010

Deutsche bank upgrades Price Target again

New street high of $604. Believes Google's likely departure
from China would leave Baidu Union the only Internet search
ad alliance around, allowing Baidu to lower TAC (amount
paid to the partnering websites) gradually. Specifically from
2H10. This should lead to margin improvement, though
limited by maintenance costs and improvement in TAC
revenue itself as traffic rebounds this year. DB raised its
FY10 and FY11 margin estimates both to 44% from 41%
and 39% respectively.


Post bar linking up with Sohu IT

Sohu's digital products forum will be integrated with
Baidu Postbar. They will share a rating system for
moderators and allow posting to Postbar from Sohu's
system. Sohu will also operate Postbar forums for
numerous high-tech and electronic devices such as
computers, netbooks, e-readers, mobile phones
including Android and iPhone, video cameras,
cameras, LCD TV sets, and home appliances such as
refrigerators and washing machines. The two companies
will jointly organize online events on the forums.

Baidu Post Bar has more than 200,000 active forums
and about 20 million active daily users, with average
daily traffic of 250 million.

[Source: Sohu report, Pacific Epoch, Marbridge Daily News]

Analysys report on Q4 China Internet searchmarket

The keyword advertising segment was RMB 1.96 billion.
Baidu seemingly had 56% of the market, which translates
to 1.09 billion. The other source of revenue for Baidu is
TAC from Baidu Union members (third-party websites
where Baidu places ads and gets a cut of the click-thru
revenue). If one estimates TAC as 12%, search should be
88% of total revenue. Which leads to RMB 1.238 billion.
The high end of Baidu's guidance was RMB 1.23 billion,
The high end of current analyst estimates is
RMB 1.28 billion, and the average, RMB 1.227 billion.
A TAC estimate of 12% is conservative, but where Analysys
includes TAC revenue is unclear.

Google counts revenue from ads placed by Chinese companies
on as part of China revenue. This means the
total reported China revenue does not correlate to searches
made within China.

Shanghai Home Hotels heavily advertised on Baidu

Shanghai CPPCC member Tu Haiming says around 1000 home
hotels can be found with a Baidu search. Most are unregulated
and charge from RMB 15 to 200 a day. Hainan Province's
Sanya City has a regulated home hotel business model similar
to the bed-and-breakfast one. Shanghai's, being unregulated,
consists of unlicensed businesses, with safety and sanitation
problems. Sometimes packing too many guests into one room,
and not changing sheets and quilts regularly.

[Source: Shanghai Daily 01/26]

Baidu wins IFPI lawsuit

The Beijing No.1 Intermediate People's Court found Baidu's
MP3 search service was legal. They ruled providing search
results of copyrighted material does not break copyright
laws. The IFPI, consisting of Sony BMG Hong Kong, UMG
and Warner Records, had filed the lawsuit on Feb 2008,
asking for $9 million.

[Sources: China Business News, SinoCast Internet and Media

Monday, January 25, 2010

Citi maintains buy; PT of $440

Believes will likely exit in the next 12 months, and
that the Chinese version of is inferior. Believes
Baidu stands to gain significantly.

Friday, January 22, 2010

Comscore reports global numbers

As per them, in 2009, the US had 18 billion searches while China
had 12 billion. The numbers, unfortunately, are not consistent
with other data showing Internet growth in various parts of the
world. Google searches, as per Comscore, have grown 58%
while Baidu's have grown 7%. The only two Chinese companies on
the list have the lowest growth rates (Alibaba is at -1%).
Comscore toolbar penetration is not analyzed in the report.

(Source: PR Newswire on Factiva, Comscore)

Thursday, January 21, 2010

Motorola will provide Baidu search as an option on its Android app store

Mobile users going with Motorola Android phones in China
will be provided an online shopping store, Shop4Apps or
Zhi-Jian-Yuan, from where they can pick the search engine
they want. (Source: Dow Jones News Wires,

Wednesday, January 20, 2010

Various analysts commenting on management level changes

"There are signs the transition to Phoenix Nest may not
be going as well as originally anticipated," said
Nomura Securities analyst Jin Yoon. (source: WSJ: 01/19)

Pali Research's analyst said that the frequent reshuffling of
Baidu's senior management indicates its inability to retain
talent. (source: Xinhua CEIS)

Mr Li's resignation could be linked to other changes in
Baidu's business - he had been expected to take over as
chief executive of 12580, the service hotline business of
China Mobile, said Cao Junbo, chief analyst at iResearch.
(source: Financial Times, 01/19)

Pali maintains neutral rating on Baidu

Believes CTO's departure will lengthen transition to
Phoenix Nest, and slow the progress of Aladdin, since
Li Yinan was in charge of both.

Report from Xinhua:

Postbar to be opened to third-party apps

Baidu plans to bring in around 100,000 partners to
provide apps for Postbar in the next three years. The
site is expected to draw revenue of RMB 100 million by

There is also a rumour Baidu has canceled its outsourcing
contract with and has revived the original,
inhouse, version of the channel. This is consistent with
Goldman Sach's note that, with competition in China's search
market done, Baidu will be freer to look at other parts
of the Web experience.

Tuesday, January 19, 2010

Baidu sues the US DNS registrar

The company operating the site,, has been sued
for gross negligence for failing to stop the hacker attack that
redirected Baidu's domain to a different IP address. Baidu's
main site was down for about four hours. In addition, Baidu was
unable to access its account to re-register the DNS entry. The
specific Baidu claims are trademark infringement, breach of
contract and negligence, under the Lanham act.

The redirected website had a flag of Iran, a broken star of
David (a Jewish sacred symbol), and "Iranian Cyber Army"
written on it. Chinese hackers retaliated the next day attacking
Iranian websites, but it seems likely the Iranian connection
is a red herring.

The case is Baidu Inc v Register.Com Inc, U.S. District Court
for the Southern District of New York, No. 10-444.

Pali: Baidu may not get most of competitor's share

Believes Google generates most of its China revenue from, not Shutting down China operations
will not cost Google much China revenue. Hence Baidu's
revenue pickup from the expected withdrawal will not be
as high as the market seems to estimate. Also claims Google
has changed its tone, and is more likely to stay, with some
concessions from the Chinese Government.

Credit Suisse (Wallace Cheung) believes China is likely to
block periodically if Google leaves China. Neither
analyst has commented in detail of the potential fallout on
tie-ups with China Mobile (wireless search), China Unicom
(G-phone/Android), Xunlei (downloads), Tianya (SNS) and

China TransInfo - realtime traffic update provider - tie up

China TransInfo provides a real-time traffic application for
monitoring traffic, with the app running on mobile phones.
They will be providing traffic info for Baidu's map search
service in Beijing, Shanghai, Shenzhen, Chengdu and
Chongqing. The company will also develop new applications,
working with Baidu, to map real-time traffic status.

People's Daily reports pornography on Baidu

The paper's reporters investigated and found it was
possible to get to porn from image searches within
both the Senior's search site and the government search

Monday, January 18, 2010

Robin Li: Baidu to grow 40 times in the next 10 years

That is an average growth of 44.6% for the next 10 years.
That would also be $26 billion in revenues in 2020. By
comparison, the US search market is roughly $13 billion
now. China's online population would be far more than
double that of the US in another 10 years, even assuming
a 10% annual increase. The GDP is expected to cross
that of the US by then (projecting an average of 13%
growth from GDP growth and Yuan appreciation).

Baike and Maps added to the homepage

Twelfth version of the Baidu homepage, starting from 2001.
The homepage position implies the features are considered

Baidu home pages archive, 2001-10

CTO leaves to be CEO elsewhere

Yinnan Li, Baidu's CTO, has left to become the CEO of
Beijing Wuxian Xunqi, operator of China Mobile's
12580 information service. The Wall Street Journal
believes this is related to the Phoenix Nest transition, while
some Chinese blogs think the resignation was caused by
Baidu's website going down for a few hours recently.
A promotion he could not possibly hope for at Baidu seems
the strongest reason. Note that Wuxian Xunqi is expected
to IPO this year or the next.

Friday, January 15, 2010

Baidu's market share fell in Q4 by 5.5%

Likely from the Phoenix Nest transition. The numbers are from
Analysys. Baidu's share fell from 63.9% in Q3 to 58.4% in Q4.
The company had forecast a fall of 10% in revenues (and, by
implication,6.39% in market share, assuming the total market
size stayed the same). That, in turn, implies no market share
gains for competitors.

Ad sales employees contacting Google China customers

to get them to switch. Calling them one by one.

Wednesday, January 13, 2010

Baidu apologizes for service interruption

Hacked DNS server caused an outage of 4 hours for the
main website. CNNIC is putting in extra protection for
Baidu's domain-name registration.

Moderator rating system for Postbar

Ratings of moderators will be shared across different forums
and Baidu platforms and with third-party community sites
which apply online with Baidu.

More analyst action

BofA-ML maintains 'buy' and raises PT from $455 to $480.
Citi maintains 'buy' and $440 PT.
CS maintains 'underperform' and $323 PT.
Piper maintains 'neutral' and $315 PT.
RBS maintains 'buy' and $450 PT.
S&P ups rating to Hold from sell, and PT of $500

James Mitchell of GS believes a Google exit would up
Baidu revenue by 25% in 2010. Pretty much all analysts
see the standoff as positive for Baidu, however it is

UBS upgrades from Neutral to Buy; PT of $523

Comments Google China already has removed filters for censored
keywords, making it likely they will be shutdown for now. Even if
they negotiate a deal to keep operating, Baidu's leverage for
bargaining with advertisers will increase because of advertiser's
concern with

Background: In his blog statement yesterday, Google's chief
lawyer stated Google China will stop filtering words required
by the government, largely related to pornography and politics.
This is in response to some phishing and other attacks launched
against some Chinese dissident's gmail accounts from within

Deutsche Bank upgrades Baidu to Buy with PT $408

Believes Google's decision to stop censoring its Chinese
site will benefit Baidu in almost all scenarios.

Tuesday, January 12, 2010

Citi maintains buy rating (morning call)

and PT of $440.

Pali reduces 2009/10 estimates; maintains neutral rating

Estimates revenue of $164.20 million in Q1.
For 2010, revenue estimate goes to $878.5M
from $937.6M and EPS to $8.99 from $9.65

Baidu website down for about four hours

Hacked at the DNS registrar site in the US. Would have affected
access to Most services restored.

Friday, January 8, 2010

JP Morgan again reiterates "Overweight" rating

and PT of $460. Believes the COO's departure has no
material impact, and repeats what they said two days

iResearch: China online ad market grew 21.2% in 09

to almost $3 billion. Baidu has around 21.2% share, which
comes to $639 million, almost inline with analyst estimates.
The market is expected to grow 50% this year, stimulated
by the World Expo in Shanghai and the soccer World Cup
(very popular in China).

The search engine section of the overall online ad market is
projected to have grown 38.2% in 2009.

Shakeup at executive level

COO Ye Peng leaving immediately, for "personal
reasons". No replacement announced. Shen Haoyu,
VP of Business Operations, is now a senior VP. Wang
Zhan, senior director of Business Products, is now
a VP.

Monday, January 4, 2010

Joint venture with foreign investors for a new online video company

Rumor has it that Gong Yu, recently from China Mobile,
would head the offshoot. The new company would have
the standard advertisement-based revenue model, with
licenced content. It has seemingly won $60M in outside
financing, with Baidu holding a controlling stake. Expected
to be online in two months.

Confirmed on 1/5 that the foreign investor is
Providence Equity Partners, an investor in Hulu.