Why Microsoft should mull Baidu buyout
Posted
May 05 2008, 09:15 AM
by
Douglas McIntyre
Google rules the search world in all but one important country. China not only has the largest population in the world, it has the largest number of people online totaling 221 million users. It passed the US last month for total number of internet citizens. At some point China could have 500 million people on the worldwide web, more than double the US.
Google's share of the search market in China is only 25%. Local search engine Baidu has 60%.
Baidu is a very small company when put along side Google. Revenue at the Chinese company many hit $200 million this year. Operating income might be $60 million. Google's revenue will be well over $20 billion this year. Operating income should be almost $10 billion. Still, Google can't make progress in China.
Baidu has a market cap of $12 billion. Microsoft was willing to spend $47 billion on Yahoo!. The US portal is the larger company, but Baidu's revenue is moving up at the rate of almost 100% a year.
Even if Microsoft buys AOL or MySpace, it picks up modest market share in search by spreading its offering across a larger number of users But, if the online community does not like the Microsoft search function moved onto properties which it might buy, consumers are like to turn back to Google anyway.
It is not clear what government hurdles Microsoft would face making a move to buy Baidu. The Chinese company has started a version of its successful business in Japan. That gives it another beach-head. With Microsoft's money, it could move into a great deal more of Asia. And, that region is the future of internet growth.
