SINA Corp (SINA), Baidu.com, Inc. (BIDU) & Renren Inc (RENN): Are These Chinese Internet Companies Poised to Play the Mobile Way?

Page 2 of 2

Research and development for future growth

Baidu.com, Inc. (NASDAQ:BIDU) dominates the Chinese online advertising market with an 80% share. The number of advertisements in the first quarter grew 30% year-over-year.

Internet users in China are expected to increase from 513 million in 2011 to 711 million in 2016. This penetration will strengthen Chinese online advertisement, which will grow at an annual rate of 24% from 2013 to 2016. Revenue per search, or RPS, the advertising revenue generated from 1000 searches, increased from $3.50 in 2007 to $5.60 in 2012. Furthermore, the company’s RPS will surge to $7 in 2013 and $7.30 in 2014.

Currently, Baidu.com, Inc. (NASDAQ:BIDU) has 37.5% market share of mobile internet search, which is less than its 80% share of personal computer search. The company is spending heavily on research and development to increase its market share of mobile internet search. This will reduce the company’s gross margin from 76.5% in 2012 to 70.4% in 2013. The mobile monetization opportunity, in the long run, will pay higher revenue, rising from $3.58 billion in 2012 to $4.88 billion in 2013.

Conclusion

All the three companies will benefit from the increasing penetration of internet usage in China. SINA Corp (NASDAQ:SINA)’S blogging website will provide a social commerce facility to its users, and the company’s mobile value added services will increase its revenue.

Renren Inc (NYSE:RENN) will launch new games for monetizing the increasing number of Android subscribers. In addition, its e-commerce website will target mobile users by launching special applications for them.

I recommend a buy for these two stocks.

Baidu.com, Inc. (NASDAQ:BIDU) will continue to gain from its dominance in the online advertising market, but its profits will be under pressure for the short-term. Therefore, I recommend a buy for the long run.

The article Are These Chinese Internet Companies Poised to Play the Mobile Way? originally appeared on Fool.com.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Baidu.com, Inc. (NASDAQ:BIDU) and SINA Corp (NASDAQ:SINA). The Motley Fool owns shares of Baidu. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Page 2 of 2