Baidu.com, Inc. (ADR) (BIDU) Can’t Afford to Mess This Up

It took some time, but Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has finally joined the Wall Street rally of Chinese growth stocks.

China’s leading search engine has been meandering since browser and security software specialist Qihoo 360 Technology Co Ltd (NYSE:QIHU) surprised the market last summer with its rival platform, but the past few weeks have been pretty encouraging.

The shares are up 33% since bottoming out three months ago, and roughly half of that came last week after the company announced a proposed buyout of the country’s leading mobile apps marketplace operator.

Tomorrow will be the next major test of Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s revival as a market leader.

Analysts see revenue surging 39% to $1.2 billion. However, they also see profitability slipping 2% to $1.21 a share as Baidu.com, Inc. (ADR) (NASDAQ:BIDU) invests in growth initiatives that don’t carry the same kind of margins as its search stronghold. There’s also the fear that Qihoo 360’s presence may drive ad rates lower at Baidu if it attracts more sponsors, even though Baidu still commands more than two-thirds of the Chinese search market.

There’s a lot of things percolating in the search market below Baidu.com, Inc. (ADR) (NASDAQ:BIDU) at the moment.

Global leader Google Inc (NASDAQ:GOOG) lost its head in China last week. John Liu — CEO of Google China — stepped down last week. His replacement will be Google Europe executive Scott Beaumont. The market may interpret a new helmsman as a reawakening of a sleeping giant, but handing China to the guy watching Google’s partnerships business in Europe is really another sign of defeat.

Google Inc (NASDAQ:GOOG)’s market share in China has slipped as low as 2%.

However, as Google Inc (NASDAQ:GOOG) fades even further away in the world’s most populous nation, Qihoo 360 is up to 15% of the market, with dreams of growing even bigger.

Reports out of China claim that Qihoo 360 is looking to buy bronze medalist Sohu.com Inc (NASDAQ:SOHU) Sogou. The combination of Sogou and Qihoo 360 would gobble up 24% of the market, making it Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s largest competitor since the days when Google peaked at a little more than a third of the market four years ago.