Blog updated with reply functions

Baidu updated its blog service, Baidu Space, with
SNS functions on December 29. Baidu Space has
changed its old "setup" page to a "management center"
that allows users to reply to visitors' comments and
messages.

Lenovo senior director to join Baidu

Zhu Guang, senior director for Lenovo (LNVGY),
Greater China, public relations and promotions, will
depart from his position at the end of December
2008.

According to the reports in local media, prior rumors
stated that Zhu planned to resign because of the
unsatisfactory promotion of Lenovo during the 2008
Beijing Olympic Games. In addition, Sina.com reported
by citing "reliable sources" that Zhu will join Chinese
search engine Baidu.com in two weeks and be in charge
of Baidu's marketing division. Zhu neither confirmed nor
denied the news, while Baidu did not comment on it.
Joining Lenovo in 1998, Zhu has been responsible for
Lenovo's brand and production promotion in China as
well as public relations and internal communications.

More unlicensed companies still advertising on Baidu

The first 25 results in a Baidu search for water heater
maintenance information were for unlicensed companies,
reports Changjiang Daily quoting a water heater
company customer service manager surnamed Zheng.

Changes to ad display

Baidu plans to move its bid ranking service search
results from the bottom of the first page to right side
of the second page for companies whose purchasing
price was lower than other current offers. The change
will be effective January 5.

Baidu began offering pay-per-action advertising in
mid-December, reports 21cn.com. The company
provides text, picture and flash advertising on tens of
thousands of Baidu Union member sites, said the
report.

Baidu wins the 5fad music lawsuit

Baidu was ruled not guilty of copyright violation by
the Beijing Higher People's Court in a lawsuit brought
by Hangzhou-based online digital music provider
5fad.com, reports the Beijing Morning Post. This was
5fad's sixth suit against Baidu, asking for a compensation
ofrequired Baidu to pay compensation of RMB 100 million.
Baidu was not convicted of copyright violation because it
provides an online location for links to music, rather than
uploading and storing unauthorized titles, said the report.

Brandlink ads

Baidu is currently developing a new search advertising
model named BrandLink. According to local media reports,
Baidu's new BrandLink area, which is laced at the top of
Baidu's web search results, is an information dissemination
platform customized for famous brands. This innovative
search model combines various display methods, including
words, pictures and videos, which can improve the search
experience of Chinese netizens using the search engine.
The BrandLink advertisement area is separated from the
common search results by a horizontal line with picture
advertisements on the right side of the page, providing a
space for the display of products. As a proper
supplementation to Baidu's bidding rank system, the
BrandLink model may gain more brand advertisers for
Baidu. The company says that so far, many major brands
such as Lenovo, Dell, Samsung, Mercedes-Benz and Audi
have started their BrandLink marketing on Baidu.

Susquehanna positive on Baidu

"Medical ad incidence is perceived as a "reset"
point at Baidu, from which on Baidu should grow
on a healthier path. The consequence is, the
market may underestimate Baidu's growth
by only looking at growth of CY09/CY08. Baidu's
growth in CY10/CY09 should re-accelerate due
to Y/Y comparison singling out medical ad
impact, a more mature eCommerce environment,
as well as recovery in the macro economy, in our
view. Baidu's C2C initiative is a different strategy
than Tencent's Paipai, and different than its
Japan venture. We fine-tuned our 4Q08
estimates to be in-line with Baidu's revised
guidance, and believe 2Q guidance will be a
better catalyst than 1Q guidance. Baidu shares
remain attractive relative to its growth
potential."

Phoenix Holdings ifeng.com joins Baidu alliance

Phoenix Satellite Television Holdings' (8002.HK)
portal ifeng.com has joined the Baidu Union
advertising alliance, reports Nanfang Daily. The
search partnership will involve the promotion of
brand and user products, said ifeng.com marketing
director Luo Di. Shenzhen-based download software
provider Xunlei.com joined Baidu Union on
December 12.

New search platform

Robin Li announced an enhanced "Aladdin" search
platform, which will grab data from currently
inaccessible "deep web" sites, at the inaugural
ceremony of its Shanghai research and development
center on Thursday, reports DoNews. Company
CTO Yinan Li said more than half of the company's
2,000 core engineers are working on the platform
which will be released in January 2009, reports Sina.

Baidu intends to establish a Tokyo R&D center in the
future, reports Sina quoting Li from the ceremony.

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Robin Li searching for a new CEO

Robin Li told Sohu in an interview Thursday that
he is still looking for the best person to lead Baidu
as chief executive. Li said he only became CEO in
2005 due to the company's Nasdaq listing, and has
always been on the lookout for a replacement. The
chief executive said Baidu page views have remained
high and have not fallen since reports of a paid search
scandal shook the industry last month.

Youku blocks search engines

Baidu, Google and Yahoo. Per Baidu, 30 to 40% of
traffic to video sharing sites in China originate from
Baidu's video search. Youku seems to be scaling
back on bandwidth.

Baidu helping SMEs put up websites

Robin Lee told the local media that Baidu has
initiated a nationwide campaign to construct
websites and optimize web content for
500,000 small and medium enterprises free of
charge. Shen Haoyu, vice president of Baidu said
that SMEs have become an important force for
China's economic development, but quite a number
of them do not have a website or have a very simple
website even though their business has already
expanded to the whole country or even the whole
world. According to Shen, Baidu has built websites
or optimized website content for free for over ten
thousand businesses. Lee disclosed that Baidu will
invest over CNY100 million to provide the free
service and relevant training.

Results of annual shareholder meeting

Shareholders approved the previously announced stock
repurchase plan.

Also approved company's name change from baidu.com inc
to plain baidu inc.

Adopted a new 2008 share incentive plan (presumably for
employees).

Baidu denied change of court for clickfraud case

The Shenzhen Futian District People's Court has rejected
Baidu's request to move a "fraudulent clicks" case from
Shenzhen to Beijing's Haidian District, reports Information
Times. A lawyer and Baidu bid ranking client surnamed
Huang filed the RMB 40,000 case against Baidu and its
Shenzhen subsidiary on August 5 after finding differences
in data provided by Baidu and a third-party software, said
the report.

Goldman: buy

PT $145. Believes Baidu will grow at 30% for the next
several years, supported by the Chinese government,
which can't let Google win there. Believes company's
growth rate will exceed GDP growth because the
market is nascent.

First time ever, GS has had a buy on Baidu. The logic
seems weak though - these factors have always been
in play.

Pali research: sell

Price target $90. Believes business model under
challenge, and new regulations likely to impact
search. Model different from Google's with
ads sprinkled in with natural search results.

Xunlei joins Baidu alliance

One of the largest Chinese download service provides
Xunlei has joined Baidu Alliance, which means Xunlei's
users will be able to directly use Baidu.com's search box
embedded in the products of Xunlei. Xunlei and Baidu
Alliance formally signed a cooperative agreement at the
beginning of November 2008, but only now is the
partnership being disclosed.

With this agreement, Xunlei will cooperate with Baidu
Alliance in all of its products, ranging from its search
engine Gougou to client. Internet search engine Baidu
says the joining of Xunlei once again shows the attraction
of Baidu Alliance to quality network resources. In regards
to the cooperation between Xunlei and Baidu, Xunlei's
marketing director Zhang Yubo told local media it is
simple business cooperation. Through this cooperation,
Baidu will supply search results for Xunlei and Xunlei
will integrate Baidu's toolbar in its products.

Prior to this, Xunlei achieved a strategic cooperation with
Google in 2007, according to which Google and Xunlei
would implement cooperation in many sectors, including
products, technology and marketing and Google would
provide overall search support to the users of Xunlei.
In addition, Xunlei has gained strategic investment from
Google. Although neither side has revealed the detailed
amount, industry insiders speculate the number might
be as much as USD5 million.

Q4 08 revenue outlook cut 13%

from the earlier range of $151 to $155 million to
the new target: $131 to $133 million. Cites a
combination of pulling unlicensed advertisers
and a slowing economy.

JP Morgan and Pacific crest cut estimates

Dick Wei of JPM cut earnings forecasts 5% for
this year and 19% for 2009, citing weaker revenue
from the medical and pharmaceutical sector, as well as
macro economic conditions affecting online ad spending
by small- and medium-sized businesses. Estimates
GAAP EPS of $4.44 this year and $5.92 next year;
the Street averages were $4.62, and $6.30. Maintains
Overweight rating and $300 target, asserting that the
company over time should maintain its market
leadership in search in China.

Pacific Crest’s Steve Weinstein sees slower customer
growth in Q4 in some regions due to the weakening
economy and the fallout from the health-care advertising
controversy. Cut his 2008 EPS estimate to $4.55 from
$4.81; for 2009 to $6.42, from $7.71. Maintains Outperform
rating, with a $250 price target, based on 40x 2009 EPS
estimate. Weinstein says the long-term story is intact, and
that P/E will likely expand when the market and economy
improve.

Phoenix nest to be rolled out sooner

Baidu plans to officially release its right-column
advertising system, "Phoenix Nest," in the second
quarter of 2009, reports qq.com citing sources.
September reports said the new system, similar to
Google AdWords, would be released soon, but Baidu
has yet to announce a release date. The report said
Baidu planned to spend three years developing the
new product, but has speeded the release in response
to recent press. China Central Television (CCTV)
reported that Baidu included unlicensed companies
in its paid search on November 15.

Goldman cuts estimates

“Following a meeting with management, we believe
that Baidu is suffering from advertisers bidding less
in certain categories such as manufacturing and
logistics, due to reduced confidence and, in some
cases, bankruptcies,” he writes. “Baidu’s revenue
may be more performance-driven than other China
media but less performance-driven than search engines
elsewhere because many of its advertisers use search
to support brands rather than drive online
transactions. We do not believe consumers are
clicking less often on sponsored results yet, though
they may do so in the future.”

Mitchell cut estimates on the company following
its recent suspension of search ads from unlicensed
health-care advertisers; today he cuts numbers
again. For 2008, his EPS estimate drops by 2%,
to $4.81. For 2009, he cuts by 11%, to $6.60, and
for 2010 he comes down 20%, to $8.54. He adds
that Baidu “appears willing to consider removing
paid listings from the left-hand side of its results
page,” which would reduce the numbers even
further.

Mitchell has slashed his price target on the stock
to $145, from $225, reflecting both lower
estimates and a lower target 2009 P/E multiple
of 22x, versus 30x previously, “as Baidu may be
proving cyclical earlier than we expected.” He
maintains a Neutral rating on the stock.

CIIRC warns Baidu of pornographic content

Baidu received on Dec. 2 a public warning from the China
Internet Illegal Information Reporting Centre (CIIRC) for
displaying pornographic content.