BIDU: What Wall Street Did Not Tell You about Baidu (1)
Shares of Baidu (BIDU) have been doing well lately. Compared to one year ago, analysts are much more positive about the stock.
BIDU is doing well partially because several analysts upgraded it within the last several months. The table below is a summary of recent broker actions. Note that major underwriters of Baidu's IPO, Goldman Sachs and Piper Jaffray, who should have known a lot about the company, have both changed their views on the stock:
| Date | Broker | Action | From | To |
| 11/16/2006 | WR Hambrecht | Initiated | - | Buy |
| 11/1/2006 | Goldman Sachs | Upgrade | Sell | Neutral |
| 9/25/2006 | Citigroup | Upgrade | Sell | Hold |
| 7/17/2006 | Brean Murray | Upgrade | Hold | Accumulate |
| 7/14/2006 | Piper Jaffray | Upgrade | Market Perform | Outperform |
| 5/10/2006 | Piper Jaffray | Upgrade | Underperform | Market Perform |
Wall Street analysts shifted their positions on Baidu for various reasons, and their arguments have been widespread among investors. Below is some useful information that the Street did not tell you about Baidu and its rival Google China:
1. Baidu is doing a trial on certain keywords to clearly differentiate ads from organic search results.
Many people criticized Baidu because it does not clearly differentiate ads from organic results. They predicted that Baidu will lose market share over time due to bad user experience. Our checks indicate that the company is testing Google's way of presenting ads.
In the picture below, a query for "Beijing Umbrella" returned two left-sided ads marked "Sponsored Links" with shaded background. This is similar to Google's practice. Baidu's normal practice is NOT to shade the sponsored links.
Picture 1: Left-Sided Ads Shaded for Keyword "Beijing Umbrella" (01/19/2007)
In the second article of this series, we will talk about an important factor behind Baidu's market share gain - Google offers incentives to distributors at the expense of advertisers.
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