[photopress:it_baidu_robin_li.jpg,full,alignright]StockRumors.com is strongly of the belief that a potential takeover of Baidu, the Internet search engine, is still very probable.
Its arguments for thisas presented by Seeking Alpha, are interesting:
The market for internet usage in the United States and in most of Europe has very little growth left. Few people in these countries do not have access to the internet or to modern search engines like Google.
China, in 2006, had 137 million internet users, a growth of 23% since last year. Compare this to the 208 million in the United States, which represents a growth of 4% in the last year.
The population of the United States is 301 million, leaving a possible growth of about 33%.
The population of China is estimated to be 1.3 billion people. Internet users in China, therefore, have a possible growth of 1,000%.
The question, then, becomes: where will these people go once they have the internet? What search engine will they use?
In 2006 it is estimated that Baidu averaged 52.3% of the search engine market share in China while Yahoo controlled about 15.7% and Google controlled 15.6%.
In the second quarter of 2007, Baidu controlled about 58.1%, with Google controlling about 22.8% and Yahoo only 11.6%.
Google, therefore, is growing in China along with Baidu. Yahoo is clearly losing market share along with others like Sohu and Sina. Google, therefore, is the only real competition that Baidu.com needs to worry about.
For Google the acquisition of a company like Baidu would be a good move as they would immediately increase their market share to about 80% of all searches in China. Google has enough cash to do a straight out purchase of Baidu, making it an easy acquisition. However, a stock offering would be fairly simple and probably even more desirable.
Google previously had a stake in Baidu but sold it in June 2006.
Even though Google is increasing its market share in China, it is mostly at the expense of Yahoo, not Baidu. By buying Baidu, Google would secure their position even further in the Chinese search market and firmly place themselves as number one.
This is the view of a site which has a reasonable reputation for accuracy in forecasting. And this forecast, on balance, makes sense. Robin Li, seen in our illustration, and the man who started Baidu, has some interesting decisions ahead.
Source: Seeking Alpha