Baidu Isn’t a Growth Stock Anymore. But It’s a Bargain
Baidu was once mentioned in the same breath as Alibaba and Tencent (BAT) – China’s tech giants. It dominated Chinese web search and fueled a massive online ad business. By 2018 Baidu’s market cap was comparable to Alibaba’s, and Americans even looked to buy its U.S.-listed shares to play China’s internet growth. But the story changed abruptly in 2020–21. The post-COVID economic rebound in China fell flat, with a property downturn and cautious consumers. Baidu’s stock plunged by over 70% from its late-2021 peak. Key reasons include a sluggish economy and cuts in advertising budgets. Baidu relies on ads for over half its revenue, and small businesses slashed marketing spend in sectors like e-commerce, real estate, and travel. In Q4 2024, Baidu’s core advertising revenue was RMB 17.9 billion – down 7% year-on-year. In short, Baidu simply isn’t growing sales like it used to.
Meanwhile, China’s tech landscape evolved. Newer players like Meituan, Pinduoduo, and Bytedance have captured consumer attention. These giants have largely relegated Baidu’s search to a backseat. Many analysts now rank Baidu far below its old peers: its market cap is just about 10% of what Alibaba’s is. In other words, Baidu has “fallen from grace” as a high-growth name in China tech. Its shares have underperformed not only the broad market but also most big Chinese tech stocks since China stock recovery in 2024 - The MSCI China was up 33% while Alibaba and Tencent were up over 60%. But Baidu stock remains down by 22%.
China’s Closed Ecosystem Hurts Search
A big reason Baidu hasn’t become “China’s Google” at the scale of Google is structural: the Chinese internet is highly closed. Instead of using independent search engines, Chinese netizens largely stay inside super-apps and curated platforms. For example, the messaging app WeChat has its own search capabilities, and shopping or short-video apps often direct users to content without ever touching Baidu. Tencent, ByteDance, Alibaba and others keep content inside their ecosystems, with little incentive to share it. In practice, this means that users often find information by searching within an app or seeing algorithmic recommendations, rather than firing off a web search.
These “walled garden” dynamics have real financial impact. Advertisers follow the eyeballs. In 2023–24 Chinese ad buyers dramatically shifted budgets into super-app channels pivoted away from Baidu. They bought more ads on higher-growth platforms like ByteDance’s Douyin and Tencent’s Weixin (WeChat). The company tried to fight back (for example, by offering “managed business pages” to brands), but growth has remained elusive and even fizzled out in early 2024.
Missed Beats
Much of Baidu’s hope for diversification has not panned out. Baidu acquired iQiyi as a Netflix-like streaming platform, believing it would capture the booming online video market. However, iQiyi has been a drag on the group. In Q4 2024 iQiyi swung back into loss – it reported an attributable net loss of RMB 189.4 million, versus a profit of RMB 466.2 million a year earlier. Revenue at iQiyi fell 14% year-over-year to RMB 6.61 billion. In short, Baidu’s video unit isn’t growing fast enough (and still isn’t reliably profitable) to buoy the company. Similarly, previous bets like the location-based services unit (Nuomi) were essentially abandoned. In each case, Baidu tried to catch new growth trends – video, group-buying, social apps – but competitors beat it instead.