Baidu Earnings More than Double as China Internet Use Surges

Google Inc's (GOOG) may rue the day it overhauled its China business and got into a dust-up with the People's Republic -- or at least its investors will.

Baidu (BIDU), which by most measures has over 70% of the China search engine market, announced that its profits more than doubled in the second quarter. The firm reported net income was $123.5 million, a 118.5% increase from the same quarter a year ago. Total revenue was $282.3 million for the second quarter, a 74.4% increase from the same period in 2009.

If those numbers were not impressive enough, Baidu said it expects revenue in the third quarter in a range of $324.4 million to $333.3 million, a 72% to 77% year-over-year increase.

The earnings may be very modest in comparison to Google's, but they are growing much more rapidly as the number of Internet users in China rises above 420 million, about double the number in the U.S. It remains to be seen if Web users in China will take to search engines the way that they have in the U.S. and Europe. Baidu will become a huge company if they do.

The Chinese may approach the use of search engines with caution. Privacy and very limited use of personal information is part of the culture of Internet use in the West. It is not clear that this is true in China. In the People's Republic, search could be a key to tracking behavior. Big Brother could be watching.