When Google left the Chinese market, the main beneficiary was Baidu which now has a massive 80% market share and is without any doubt the most important search engine. This explains why the revenues have increased dramatically in 2011 and are now four times higher than they were back in 2008. Some competition has emerged, but Baidu is still in the driver's seat and if it manages its dominant position well, it should be capable of maintaining its income growth.
Is the competition a real threat?
Google used to be the main threat for Baidu, but the Chinese company would be foolish to dwell on its recent success, because there are other competitors to fear. Qihoo is not yet the dominant force that it aspires to become one day, but it is gaining market share and could one day be the leading search engine in China. With Baidu making more than 60% of its profits in this line of work, this challenge needs to be taken seriously.
Binary options traders have no reason to fear Qihoo just yet, but should keep an eye on them if they back Baidu right now. As the competition intensifies, the advertisers will have more options and this will undermine Baidu's position and lead to lower profits from advertising. The company can offset these effects by playing its experience card well, but their monopoly in the search engine business can't last.
Watch out for the advertising and mobile markets
It is very convenient for Baidu to dwell on the revenues generated by the search engine, but the company needs to keep its eyes open for alternatives. The advertising segment is one that generates decent income right now, but it has the potential of further increasing these profits. Display ads are more difficult to monetize, but it is refreshing to see that Baidu didn't neglect them despite the fact that right now everything goes its way.
The mobile search market is yet to be conquered in China, because Baidu's 35% market share is great but can be much better. Binary options traders must pick up on any vibes, because Baidu has to pay attention to the mobile. Some steps have been made in the right direction, such as the launching of its proprietary operating system but there are still things to be done to improve the monetizing of mobile users.