Baidu.com, Inc. (ADR) (BIDU), Google Inc (GOOG): China’s Slowdown Should Not Stop You From Buying

It simply makes sense for companies to do this — it is cost-effective and usually hits a target market better than any other advertising tool.

And as time goes on, Google collects more information on every user, making its ads even more relevant — whether we’re in a recession or not.

What it means for Baidu.com, Inc. (ADR) (NASDAQ:BIDU)
Back to China: Though Baidu.com, Inc. (ADR) (NASDAQ:BIDU) and Google certainly aren’t the same company, Google has laid out a blueprint for success that Baidu can easily use to produce similar results.

While it might seem odd for Americans to imagine, the Internet itself is still a relatively new concept for Chinese citizens.

Source: World Bank.

Nearly eight in 10 Americans use the Internet regularly, but less than half that percentage uses the Internet regularly in China.

And think about how inexperienced China’s Internet users are. When America passed the 10% penetration threshold 17 years ago, Google hadn’t even been founded yet. China, on the other hand, only passed that mark in 2006. Most Chinese Internet users have only been online for less than five years.

As they become more experienced — which they likely will, regardless of the macroeconomic climate — ads delivered by Baidu will be more valuable to Chinese businesses. In fact, Baidu recently said that it had about 600,000 business customers using its services for advertising. While that might seem large, the company sees the potential market of 10 million advertising customers. That means the customer list could increase tenfold and the company would still only have a 60% market share!

Why pass at this price?
Even if I’ve underestimated the effects the China slowdown could have on the company, and overestimated the market potential, today’s price has a worst-case scenario baked in. In fact, Baidu is now cheaper than its ever been.

BIDU P/E Ratio TTM data by YCharts.

The article China’s Economic Slowdown Shouldn’t Stop You From Buying Baidu’s Stock originally appeared on Fool.com.

Fool contributor Brian Stoffel owns shares of Google and Baidu. The Motley Fool recommends Baidu and Google. The Motley Fool owns shares of Baidu and Google.

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