Thursday, August 09, 2007

Shawn Wang: We are in early stage

How big really is the Chinese search market economy? With a market cap approaching 7 billion dollars, Baidu believes that the current market is only just the beginning.

Yesterday, in Beijing at the "Baidu World" conference, Baidu's CFO Shawn Wang had an interview with reporter from Shanghai Securities News. Recently, Baidu has been voted the "most influential overseas-listed Chinese companies" by the newspaper.

Reporter : Oversea's financial analysts have very divergent views on Baidu's valuation, how do you view this issue?

Wang : It's not an easy thing for foreign financial analysts to value Baidu since we gave little guidance. Doing so is because we don't want to be in a position to be scrutinized. We at Baidu knows the search marketing in China is still in it's infancy stage. We must create a good operational environment ourselves. We have seen earlier oversea-listed Chinese companies complaining about over involvement of Wall Street investors.

Reporter : So what's the reasonable valuation for Baidu?

Wang : Regarding the value of Baidu, this is a very difficult question to answer. But there are several key comparative figures we can look at. If you compare China's economy and the economy of the United States, the scale of China's economy is about 70% of the scale in the United States and soon to become the world's second largest economy. In regard to advertising, the scale of China's advertising market is only one twentieth of that of the US. China's online marketing is about one fortieth the size. China's search market is probably only one sixtieth of the U.S. search market.

In contrast, the Chinese market is even more suited for search economic development. The Chinese market is currently in a more entrepreneurial atmosphere. China has a large number of emerging enterprises, the SMEs looking for expansion but lack of a unified domestic market. Baidu's PPC service provides SMEs with a perfect platform. Therefore, China's market environment should be more conducive to the economic development of search.

However, many SMEs with capacity of spending are not very familiar with the Internet. That is why Baidu have built such a large marketing and customer service teams. What Baidu is doing is like a missionary in spreading the seeds.

Reporter : Currently there is a huge gap between Baidu's market capitalization and revenue and the international giants such as Microsoft and Google. How to avoid a hostile takeover? Does this gap put pressure on Baidu for doing business?

Wang : First of all, all these multinational giants have experienced the same stages that Baidu are experiencing, though Baidu's growth rate has far exceeded theirs. As for the hostile takeover, Baidu listed in the beginning of a specially made arrangements, the so-called "Newcastle", in order to prevent hostile takeover by foreign investors. Baidu is not concerned.

reported by Shanghai Securities News.


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