Baidu isn't worth the love…

Ever since Google threatened to pull out of the China market back in January, Baidu’s stock price has risen by a lot. As I’m writing this post now, it’s trading over $600 a share. There are even some idiots in the media getting excited over its share price being more than Google’s (and totally forgetting that it’s the market capitalization that determines which is a more valuable company, not the price of a single share).

Give me a break here… When all the fuss over Google’s “exit” from China subsides, Baidu’s share price will go back to normal, too. The current hype over Baidu is non-sense and that really ought to be clear to you.

1. Nothing really changed with Google “leaving.” People can still do their internet search on Google.com. — People in China have been able to access Google.com even after Google officially entered the market and created Google.cn 4 years ago. And even though you still can’t conduct uncensored search (now the GFW is doing the censoring on the Google HK site), it’s not as if Google’s loyal users in China would have to run to Baidu’s site.

The real game changer, of course, is if the Chinese government decided to block access to all of Google’s sites, which it certainly can. If that happens, that’s when Baidu can really grab some of Goog’e's market share in China. But even then Baidu may not have that much to gain…

2. Baidu’s growth potential is fairly limited. — Baidu is already the clear leader in China. No doubt. But it also doesn’t have much of a global business. That means its China business is all it’s got! But outside of China Google is the clear leader (except in certain markets like South Korea, but Baidu would stand no chance in those markets, too). What can Baidu do then? It’s expanded into e-commerce but Taobao is the clear leader in that space. BSP? Sina is the learder. SNS? QQ got that market already. Social games? Again, that’s QQ’s specialty. Yeah… if stock prices are a reflection of people’s expectations on future performance, then people’s expectations on Baidu are definitely misguided by the not-so-real opportunity created by Google’s “exit” from China.

And please, people… Do not see Baidu vs. Google and automatically think China vs. US. Baidu, as you should know, got off the ground in 2000 with American funding. And it is now listed in NASDAQ which means its drawing more capital from non-Chinese investors. So in that regard, Baidu is hardly a Chinese owned company.