Baidu (NASDAQ:BIDU) will announce its earnings for Q1 2012 on April 24. Baidu is the leader in the Chinese online search space where it competes with Google (NASDAQ:GOOG) and a few small local competitors. It generates most of its revenues from search and display advertising. Given the turbulent relationship that Google has had with the Chinese administration, Baidu is likely to continue to dominate the Chinese search space. There have been some significant developments in the past couple of months, which could impact its future in search, going forward.
Mobile search to drive search advertising revenue
Mobile search is becoming a major search query driver globally, including China. China has overtaken the U.S. as the largest smartphone market, and continues to see increasing sales of smartphones like the iPhone and cheap Android devices. Baidu, with its new Baidu Yi OS, which is a modified version of Android, could stand to gain significant market share given its local focus. As Baidu’s search engine is integrated in its OS, this could drive Baidu’s mobile search market share if Yi turns out to be a hit.
Speculation suggests that Apple will be adding Baidu as the default search engine on the iPhones shipped to China. Given the high web usage on the iPhone compared to other smartphones, and the high iPhone sales expected in China over the coming years, this could be another factor driving Baidu’s market share in mobile search.
We currently have a $144 Trefis price estimate for Baidu, which stands nearly 2% below its market price. Search ads, display ads and ad partnerships account for its entire value.