Citigroup Comments on Baidu.com (BIDU)

March 14, 2007 8:49 AM EDT

CONTRIBUTOR http://notablecalls.blogspot.com

Citigroup has some interesting, yet concering comments on Baidu.com (NASDAQ: BIDU) after completing a paid search survey. The takeaways include:

Concerns on Baidu's growth rate reinforced. 1) Baidu likely seeing higher churn, with 15 advertisers planning to cut spend in next 6 months for every 20 planning to increase. 2) Google can't be counted out: advertisers give it higher satisfaction and spend more on Google on average than Baidu.

Advertiser breakdown suggests Baidu's lead over Google less than traffic lead. Of the respondents, 86.3% advertise on Baidu and 62.2% on Google (respondents advertise on more than one engine). This contrasts with the traffic share numbers from Sept, where Baidu had 61.9% share vs. 24.1% for Google

Google looks set to gain from ad budgets in the next six months: more advertisers plan to increase their spend (~25%) plus fewer plan to decrease their spend (only ~5%) on Google, compared to Baidu, where ~20% plan to increase spend, but 15% plan to decrease spend.

Maintains Sell on BIDU.

Notablecalls: This may be the reason why BIDU was so weak yesterday. On the other hand, I've never really seen anything leak out of Citi before. Would not be surprised to see some initial weakness in BIDU following these comments.

For more calls go to: http://notablecalls.blogspot.com

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