Below are key drivers of Baidu's value that present opportunities for upside or downside to the current Trefis price estimate for Baidu:
For additional details, select a driver above or select a division from the interactive Trefis split for Baidu at the top of the page.
Touted as the Google of China, Baidu is the number one Chinese language search provider and the most visited website in China. Baidu's main search operation provides search for websites, audio files, and images.
Baidu offers a unique Chinese language search platform to both users and customers. This platform consists of its own websites and the Baidu Union - a network of third-party websites and software applications. By generating traffic from its users, Baidu is able to attract business customers that wish to advertise their products and services alongside Baidu's search results and on Baidu's web properties.
Baidu makes the majority of its money from its search operations. Baidu's search advertising business is driven by two important factors that contribute to its significance:
Baidu dominates the search advertising market in China, with an estimated market share of over 80% (by revenue).
Though Qihoo 360 and Sogou have emerged as credible players in the desktop online search market, Baidu has gained dominance over the country's mobile search market. Baidu also competes with Bing and Google China in the domestic search market.
Demand from online advertisers for keyword advertising on Baidu sites could continue to cause upward pressure on Baidu's Revenue per Search.
The Internet penetration rate has steadily increased, but the Internet penetration rate remains low compared to developed countries (for example, the U.S., U.K., France, and Japan.
Relatively low penetration rates translate into better opportunities for growth as the user base still remains low compared to the total population of the state.
The Chinese online video market has exploded in recent years, driven by the increasing penetration of smartphone users and high-speed internet in the region. This is expected to continue to drive iQiyi online video streaming revenues in the coming years.
Baidu’s market share in desktop searches has decreased in recent years, as Qihoo 360 and Sogou have seen significant gains. Nevertheless, Baidu has retained its dominance over the mobile search market (commanding more than 80% market share). Yet Qihoo 360 is taking aggressive measures to increase its share in the mobile search market. If it does so, it could make a serious dent in Baidu’s market leadership. Additionally, since Qihoo and Sogou are ramping up their search monetization, this could also impact Baidu’s ability to raise prices on ad units.
Driven by the rising adoption of mobile Internet and smartphones, Baidu's mobile search users are growing explosively. This has also contributed to increased monetization on the mobile platform.
Mobile revenue now comprises over 50% of overall revenues, as mobile search now accounts for over two-thirds of overall search traffic on Baidu, and its mobile monetization rate has improved over the past few quarters.
Baidu aims to fuel the next chapter of its growth with O2O e-commerce initiatives. These include services to connect users to merchants such as online travel, ticket booking, entertainment, food delivery, grocery, and other services. The company’s management expects this to be an RMB 10 trillion market opportunity.