Baidu Inc (ADR) (NASDAQ:BIDU)’s mobile revenue growth has been impressive, doubling from just 10% in the second quarter of 2013 to 20% in the fourth quarter. The growth momentum is expected to continue this year, as well. A report from Seeking Alpha by Stock Gamer lists a few factors fueling the mobile growth for the Chinese firm.
On-going mobile shift helping Baidu
In China, Baidu’s mobile platform boasts a user base of 100M capturing 40% of the market share. The mobile distribution channel of the company is ranked No.1 in China, and presently, Baidu Inc (ADR) (NASDAQ:BIDU) has 14 mobile products from various fields including app distribution, online searching, internet browsing, and video browsing. With such strong mobile infrastructure, the company is expected to grow its market share and mobile growth.
According to the management, all the advertising customers of the company have allocated some budget to the mobile platform, as well. Baidu’s market share in search traffic has grown from 71.4% in July 2013 to 72.9% in January 2014. Considering consumers ongoing shift towards mobile, and Baidu’s rising clout in search traffic, the mobile growth for the company is expected to surge as time goes on.
Investment fueling mobile growth
In China, mobile gaming market has seen an impressive growth of 123% in 2013, and Baidu Inc (ADR) (NASDAQ:BIDU) has a significant presence in the segment through its No.1 mobile app distribution platform. The growing segment would surely add to the mobile gaming revenue of Baidu.
During the fourth quarter earnings call, management revealed that 2014 is going to be an investment year, and a majority of the investment will focus on channel and marketing for mobile products including pre-installation of mobile apps and offline advertising. Considering the effectiveness of the previous investment cycle, a fresh round of investment should produce results in late 2014 and 2015.
Smaller rival may become a big threat later
One thing to watch out for Baidu Inc (ADR) (NASDAQ:BIDU) is the rival Chinese Internet company Qihoo 360 Technology. Though Baidu is still ahead by a huge margin in the China’s search engine market, the gap is shrinking. Qihoo primarily deals in mobile security software, but of late has been investing in new mobile gaming and search technology. Compared to Baidu’s $5.2 billion in revenue, last year, Qihoo is much smaller with $671 million in revenue.
