Google may very well be the 800 lb. gorilla here in the United States when it come to online search engines and indeed they are. Google has a market share in the U.S. higher than 50% over its top competitors in Microsoft and Yahoo. However, in China, the top search engine is Baidu and their market share seems to be nearly insurmountable, even for Google.
Today, Baidu boasts of a share of the search engine market in China of over 78%, while Google is barely approaching 17%, and according to industry analysts, Baidu has a lot more room for growth despite its already fairly lofty ranking. For its part, Google attributes a great deal of the difference between the two companies to a concerted effort on the part of Google to willingly withdraw from the Chinese market due to their strong concerns about censorship in China and the heavy-handed way in which the Chinese government tries to control what is and what isn’t allowed to flow through their cyber space.
The market will be paying close attention to the financial reports from Baidu, which are due out later this week, at which time analysts expect that the Chinese search engine giant will report a gain in their earnings per share of 82% and a huge increase in sales of over 90%, numbers that not even Google can match. However, before jumping on the Baidu bandwagon, investors should be aware that the bandwagon is already very crowded as shareholders have already pushed the price of a share of Baidu beyond a 30 time multiple of expected 2012 earnings. But if their earnings continue to multiply as they have to this point, market watchers say that the price per share and the multiple paid for a share is only going to go higher, much higher.
It looks like being a business operating in cahoots with the Chinese government is the only way to make serious money there, at least when it comes to the Internet, and social media type of businesses. Google and Facebook have to be very wary of the Chinese government whereas as company like Baidu has no such concerns and can operate within the confines of Chinese law and still make a tremendous amount of money. Investors in the company are then left to ponder if they want to fill their pockets at the expense of freedom of speech for people in China?
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