Let’s see if Chinese tech company Baidu Inc (ADR) (NASDAQ:BIDU) can do what many big-tech U.S. companies couldn’t this year. That is, get by unscathed in Europe.
Baidu sees an opportunity in the European market, as U.S. companies essentially run the technology scene and Europeans are sick of it.
The European Union is now looking at everything from personal privacy to anti-competition violations to take conglomerates like Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL) down a peg.
Speaking with CNBC, Baidu CEO Robin Li had this to say:
“In terms of technology, at least in the past, it’s pretty much U.S. companies dominating everything. Now, Chinese internet companies are coming up and we will be able to provide viable alternatives.”
Sure enough, Google could face as many as three antitrust cases from the EU concerning Search, mobile and advertising. Meanwhile, the EU slapped Apple with a $14.5 billion bill in back taxes, which Apple CEO Tim Cook rejects.
The iron is hot.
What Europe Means for BIDU Stock
Investors sure seem pleased with Baidu’s proposed European venture, sending BIDU stock up 5%-plus. After all, Baidu is facing a slew of regulatory and competitive challenges amid a sales slowdown and a cash crunch.
And BIDU has pretty much monopolized its homeland thanks to the ousting of Google in 2010, so there’s no hope for exponential growth in China. That hope still exists in Europe, however. In July, Li noted that BIDU needed to “find a new battleground.”
Like Facebook Inc (NASDAQ:FB), Baidu derives more than 90% of its revenues from advertising, meaning the company needs to continue adding users to attract advertisers. It can’t do that in a country where it’s pretty much all tapped out. According to Expanded Ramblings, Baidu has 80% of China’s search market, and it also has 667 million mobile search monthly active users.
Outside of China and Japan, Baidu is only in emerging markets such as Brazil, Indonesia and Thailand. If BIDU can gain ground in Europe, it can continue growing its MAUs at a breakneck pace.
Diversification, however, is necessary for Baidu, as traditional search platforms face competitive risks from Facebook and WeChat, among several other social networking apps. And Baidu has plenty of other ventures, too.
These include a recent permit it won to begin testing autonomous vehicles in California and a partnership with Nvidia Corporation (NASDAQ:NVDA) to build a platform for its self-driving cars.
According to Nvidia CEO Jen-Hsun Huang, their partnership will enable “Baidu to get a self-driving taxi fleet on the road.”
Let’s hope so, because BIDU stock will only move materially higher once Baidu taps into a needle-moving source of growth outside of search. And if it’s going to find that growth anywhere, it’s Europe.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
