An­a­lysts say Baidu must di­ver­sify fur­ther

China Daily (USA) - - BUSINESS - By MASI masi@chi­

Baidu Inc needs to do more to di­ver­sity its busi­ness as the Chi­nese search en­gine firm falls be­hind do­mes­tic peers Alibaba Group Hold­ing Ltd and Ten­cent Hold­ings Ltd in rev­enue and profit, an­a­lysts said onMon­day.

Such ef­forts are of ur­gent im­por­tance to help Baidu safe­guard its po­si­tion as one of China’s big three in­ter­net gi­ants, they added.

In the sec­ond quar­ter ended June, Baidu saw 34 per­cent plunge in net in­come, which de­clined to $363 mil­lion and was less than one-fourth of that ofTen­cent, oneof the­most prof­itable tech firms in China.

Also, as the Bei­jing-based firm wres­tled with tougher gov­ern­ment reg­u­la­tions on on­line ad­ver­tis­ing in the sec­ond quar­ter, e-com­merce heavy­weight Alibaba de­liv­ered its most ro­bust quar­terly growth since its 2014 IPO, marked by a 59 per­cent yearon-year rise in rev­enue.

Vin­sanWang, an an­a­lyst at Tiger Bro­ker­age Group, which pro­vides in­ter­net bro­ker­age busi­ness for US and Hong Kong stocks, said the rev­enue and profit gap be­tween Baidu and its two archri­vals Alibaba and Ten­cent is widen­ing, but Baidu is still one of the top play­ers in China’s rapidly chang­ing in­ter­net land­scape.

“In terms of profit, it is still ranked along­side in­ter­net firm NetEase Inc as the third big­gest in­ter­net firm,” Wang said.

“But it needs to fol­low Alibaba and Ten­cent’s foot­steps to seek more rev­enue sources and re­duce de­pen­dence on its core search en­gine busi­ness."

Ac­cord­ing to Wang, Ten­cent is cur­rently the most di­ver­si­fied player among the three firms, which have dom­i­nat­edChina’s in­ter­net mar­ket for sev­eral years.

In the lat­est quar­ter, Ten­cent earned 48 per­cent of its rev­enue from gam­ing and 24 per­cent from the so­cial net­work­ing busi­ness. In sharp con­trast, 93 per­cent of Baidu’s rev­enue came from a sin­gle source — on­line ad­ver­tis­ing and mar­ket­ing.

Ma Qi­jian, an in­ter­net re­searcher at Pek­ingUniver­sity, said Baidu still has a sprawl­ing pres­ence in China’s search en­gine in­dus­try and has sub­stan­tial im­pact on con­sumers. As of June, Baidu’s mo­bile search ser­vice had 667 mil­lion monthly ac­tive users.

“But it has been slower than Ten­cent and Alibaba in tak­ing ad­van­tage of the op­por­tu­ni­ties brought by the mo­bile in­ter­net era. As a re­sult, Baidu is find­ing it in­creas­ingly dif­fi­cult to de­velop a pres­ence in new ar­eas such as food de­liv­ery and mo­bile pay­ment in which Alibaba and Ten­cent have al­ready be­come es­tab­lished play­ers.”

OnMon­day, the mar­ket value of Ten­cent and Alibaba both ex­ceeded $240 bil­lion, but Baidu only had a val­u­a­tion of around $61 bil­lion.

“Baidu has great po­ten­tial in cut­ting-edge tech­nolo­gies such as ar­ti­fi­cial in­tel­li­gence and self-driv­ing ve­hi­cles, but it takes years be­fore these prod­ucts en­ter into com­mer­cial use, and it re­mains to be seen which one of the three firms will have the last laugh,” Ma said.

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