Baidu Should Continue Its Stellar Performance

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Chinese Internet giant Baidu (NAS: BIDU) continued its dream run as its fourth-quarter revenue skyrocketed 83% to $709.7 million from the comparable period last year.

And there's more: The company has also seen its net income margins rise significantly over the years to 45% in the latest fourth quarter.

Delving deeper, I found a lot of other reasons which make me hopeful that Baidu is a good option for the long run.

Dizzying heights in 2011
With a stunning 78.3% share of the Chinese online market, Baidu clearly enjoys a significant edge over peers Google (NAS: GOOG) , which has managed to obtain 16.7% of the pie, and Sohu (NAS: SOHU) , with 2.7%. This also automatically makes Baidu the No. 1 destination for online advertisers in China.

The number of Internet users in China seems to have crossed the 500-million mark, which has led to more advertisers' resorting to the online platform, rather than traditional media. Baidu's leadership position in this space has ensured a rise in its advertising customer base by 13% from the previous year, along with higher average revenue per user, which has risen by 61.8%.

However, Baidu doesn't seem to be satisfied with these figures alone.

A more exciting 2012
The company has big plans to capitalize on the increasing number of mobile Internet users in China, which has touched an astonishing 355 million. Baidu is looking to monetize its mobile search traffic and social media platforms, helped by a deeper and more diverse user base than its competitors'.

Baidu is further expanding its mobile presence with its very own smartphone operating system, dubbed "Baidu Yi." Yi integrates web search, music, maps, and other social media applications, and the company hopes to provide users "the premium Internet experience right on their mobile devices."

Last year, Dell (NAS: DELL) launched a smartphone model running the "Baidu Yi" operating system that can also run Android apps, a combination which should appeal to the young Chinese population. Baidu expects to tie up with more vendors to expand its "Yi" presence.

Besides looking for new initiatives in the mobile Internet space, the company also intends to explore long-term international opportunities. It is also fast expanding its presence in the travel and online video sectors to grow its operations further. To top it all off, Baidu is actively involved in the process of launching a newer version of its Internet browser, a move slated to enhance the popularity of its products.

Just a minor thought
Despite all the positive factors, there's one minor irritant. Some investors fear the slowing Chinese economy might have an impact on Baidu -- a sentiment I do not completely agree with. While the country's currently projected growth rate of 8.1% for 2012 is slightly lower than previous projections, it should still be enough to sustain Baidu's growth in future.

What also cheers me up is that the Chinese government is taking corrective steps by reducing the reserve ratio obligation, among other measures, to boost economic growth in China.

The Foolish bottom line
Baidu is all set to grow its advertising revenue and leverage its popularity among online users in China. This stock surely deserves your attention for all the right reasons.

So, don't forget to stay up to speed with the latest on Baidu by adding it to your Watchlist. It's free and lets you stay on top of the latest news and analysis for your favorite companies.

At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Baidu. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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