Baidu Turns the Page


Baidu (NAS: BIDU) wants to be more than China's top search engine, even if it means sacrificing near-term profitability.

In an interview with Bloomberg on Friday, CEO Robin Li detailed the site's home page makeover.

Instead of simply steering visitors to lucrative paid search results for lead-hungry advertisers, Baidu's new homepage features a section promoting apps by third-party developers and links to other websites.

Baidu clearly isn't broken in its current form. It now fulfills more than three-quarters of the country's search queries. However, pushing ad clicks hasn't worked wonders for its reputation. Government-run China Central Television ran another unflattering expose on the dot-com speedster last month.

Baidu has been able to bounce back, but it apparently feels that the time is right to become a broader portal.

These new initiatives won't pay off right away. Baidu made a strong push into video last year, even if niche leaders (NYS: YOKU) and Tudou (NAS: TUDO) have yet to turn a profit. It tried to copy the success of SINA's (NAS: SINA) Weibo in micro-blogging, but that hasn't exactly panned out. Its latest emphasis is on mobile, but it's too soon to call.

Baidu Yi -- a mobile app platform along the lines of Apple's (NAS: AAPL) App Store -- was launched on Friday, even before Baidu's own mobile operating system hits the market. Promoting Baidu Yi on its homepage may cost it some easy paid-search revenue, but it's all about the long-term goal of promoting Baidu as more than just a search engine.

Baidu is currently trading at 32 times next year's earnings. That may not seem cheap, but it's a bargain historically. The dot-com darling is also growing a lot faster than that,

Baidu's growth has been impressive. Revenue and earnings climbed 78% and 95%, respectively, in its latest quarter. Will the new changes slow Baidu's torrid pace, or will the new initiatives be incremental? Investors may wonder why Baidu needs more out of life than the juicy high-margin fruit of paid search, but you also have to admire a company using its successful brand as a springboard to reach new places.

If you want to stay abreast of the latest developments at China's leading search engine, addBaiduto My Watchlist.

At the time thisarticle was published The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of SINA, Baidu, and Apple, as well as creating a bull call spread position in Apple. 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.Longtime Fool contributorRick Munarrizcalls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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