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| August 6, 2005 05:30 PM EDT | Reads: |
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In a day reminiscent of the late 90s, the Chinese search engine company baidu.com was bid up more than 350 percent in its first day of trading on the U.S. market, rising from its IPO price of $27 to $122.54. The closing price valued the company, which is being potentially touted as "the google of China" at more than $4 billion.
Google itself made some theoretical money yesterday, as it had previously bought a 2.6% share of baidu.com for $5 million, a stake now valued at $92 million. Google, of course, has seen a dramatic run-up in its shares since its IPO less than a year ago, and the company now has a market cap north of $80 billion.
If nothing else, the baidu.com Nasdaq madness underscores the fact that search is now the most dynamic segment of the IT business. Google and Yahoo are dueling for global market leadership, Microsoft has shown renewed enthusiasm in this market, and high-profile search executives are being hired right and left (and in one case, triggering a lawsuit between Microsoft and Google).
Yet baidu.com in fact derives little income from paid search, but rather makes its money today primarily from text messaging and games. A generation of U.S. consumer marketing executives were seduced by the promise of "two billion armpits" in China in the 70s and 80s, only to be disappointed when the realities of a then impoverished and relatively closed country imposed severe limits on business success.
China is more open and wealthier today, and has emerged as one of the world's top economies. Will the promise of two billion-plus eyeballs be fulfilled by baidu.com? Google skeptics have so far been disappointed, as the company has soared beyond expectations for some time. Yet baidu.com faces a reality of a much less advanced e-business infrastructure in China, as well as competitors such as sina.com and sohu.com. Already some analysts are calling the first-day results for baidu.com "ridiculous." What do you think?
Published August 6, 2005 Reads 3,263
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SOA Web Services Journal 08/06/05 05:13:00 PM EDT | |||
Baidu Bids Adieu to Reality, Soars on IPO. Legions of U.S. consumer companies got fooled by the idea of 'two billion armpits' in China in the 70s and 80s, as they assumed the country's huge--but then impoverished--population would reap enormous new profits for them. China is a much wealthier country today. But are the investors who bid up 'the google of China' yesterday being fooled by the same old mirage? |
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WSJ News Desk 08/06/05 10:55:17 AM EDT | |||
Legions of U.S. consumer companies got fooled by the idea of 'two billion armpits' in China in the 70s and 80s, as they assumed the country's huge--but then impoverished--population would reap enormous new profits for them. China is a much wealthier country today. But are the investors who bid up 'the google of China' yesterday being fooled by the same old mirage? |
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