Baidu eyes small gains on Google in China

SHANGHAI, CHINA: Baidu Inc expects only marginal gains if China ousts rival Google Inc from its Web search market, and is banking instead on rapid Internet adoption in that country, Baidu's chief financial officer said on Thursday.

The impact is minimal on Baidu's business as the companies share common clients, CFO Jennifer Li told Reuters in a telephone interview.

"I think the Google incident is only generating marginal impact, positive impact on our platform," Li said.

Baidu instead expects to grow as the number of people using the Web in China rises. It also sees its new search keyword bidding system spurring growth in coming quarters, Li said.

"We have a lot of leeway ahead of us, there are a lot of positive forces working for us," Li said.

Baidu's shares have rocketed 76 per cent since Google said in January that it might leave China because of censorship concerns and a hacking episode that it said originated in the country.

Google shares have fallen about 25 per cent since then, while the Nasdaq is down 8 per cent.

China's foreign ministry said on Thursday that it had no comment on Google's decision to end automatic rerouting of users to its uncensored Hong Kong search portal, but that all Internet operators had to abide by local laws.

Google said on Monday it would end automatic redirection of users to its Hong Kong search site. Beijing had expressed displeasure at the practice and said it would be unwilling to renew its Internet Content Provider licence if it continued.

Analysts said Baidu could win as much as half of Google China's search revenue if that happened. That would add as much as $330 million annually to Baidu's top line, representing a more than 50 per cent increase on 2009 revenue of 4.45 billion yuan ($654.8 million).

Baidu's aim, she said, is to grow China's 7.15 billion yuan search market.

"We are investing heavily and very aggressively in growing ourselves first and having a bigger team and salesforce to make sure we have a better reach and bigger reach to our customers," Li said.

Baidu is expected to report its second-quarter results this month. The firm is expected to earn $104.05 million and hit $270.54 million in sales for the quarter, according to analysts polled by Thomson Reuters I/B/E/S.

That implies an 85.5 per cent rise in net income and a 68 per cent rise in revenue. Baidu forecast revenue of $268.1 million to $274 million for the second quarter.

Li said the average revenue per user will continue to rise because of Baidu's new search keyword bidding system.

Baidu trades at a forward 2010 price-to-earnings ratio of 61 times, more than triple that of Google.

Baidu captured more than 64 per cent of China's search market in the first quarter, while Google had about 30 per cent, according to research firm Analysys International.