In China, Baidu (NSDQ: BIDU) is the undisputed king of search, now controlling 60 percent of that market. But Credit Suisse analyst Wallace Cheung says its dominance will start to slip in the next few years, at the hands of Google (NSDQ: GOOG) and e-commerce site Taobao. In a report issued today, Cheung says Baidu's share will drop from 59 percent in 2008 to 55 percent in 2009 and 51 percent in 2010. Meanwhile Google's share increases from 23 percent in 2008 to 33 percent, and Taobao's share runs from 1 percent to 11 percent.
Cheung offers a couple reasons for the changes in market share:
Google will gain share from higher growth in search traffic as it optimizes its service in China, forms partnerships, and builds its salesforce, which is largely seen as the best in the business. In addition, Google is launching search products for music, mobile, and maps this year.
Online shopping site Taobao should gain share because Cheung points out that most Chinese don't use search engines as their primary shopping source. In fact, 44 percent of respondents in a survey performed by Credit Suisse said they used Taobao rather than a search engine for their shopping needs. Only 22 percent said they used Baidu. Over the next few years Cheung believes this will grow as Taobao bolsters its offerings.
Baidu reported strong first-quarter results and said the second quarter would be strong too, but it's tough to bet against Google in search. The only question seems to be whether it will be able to grow its share (at Baidu's expense) as quickly as Cheung predicts.
By Rory Maher