Eroding Growth Prompts Response From Baidu.com, Inc. (ADR) (BIDU)

Meanwhile, Qihoo 360 partnered with Google to bring Google’s expertise in online advertising to Qihoo’s search engine. With more than 528 million Internet users, even a small percentage of a market more than twice the size of the U.S. is a significant revenue stream. So, while Google is obviously holding its nose over this deal, some part of a large pie is better than no part. For a company that made such a stink over government intrusion into its business (i.e. censorship in China) it is perfectly willing to accept government intrusion in its U.S. operations (i.e. privacy concerns).

Currently, only 40% of the Chinese population uses the Internet, so there is still a tremendous opportunity for organic, if not market share, growth. The partnership between Qihoo and Google could shift the dynamics of the search industry in the long run, but currently, given Baidu’s own strategic moves, it looks unlikely in the short term. I’ll be watching for sustained, if unspectacular, market share growth for evidence of that. Regardless, a lot of the Baidu growth story looks to be behind them as competition is steadily eroding advertising margins while costs are rising.

The article Eroding Growth Prompts Response From Baidu originally appeared on Fool.com and is written by Peter Pham.

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