Yesterday, China's #1 search giant, Baidu reported a quadrupling of sales. And on Tuesday, Yahoo! announced that their profits have tripled thanks to online advertising.

Baidu

Baidu.com is China's largest Web search engine.

Founded in 1999, the Company, based in Beijing, offers 350 million Web pages in its database of searchable sites.

In June, Google announced it had made an investment in the Chinese Search Engine marketplace by taking a minority stake in Baidu. (See: 6/15/04 Related Story)

The outlook for the world's second-largest Web audience after the U.S. looks outstanding.

Baidu's focus is to continue to expand its dominance in the Chinese market before entertaining an initial public offering in New York.

Until the company's most recent financing this summer, the company had raised $11.2 million from venture capitalists (Draper Fisher Jurvetson ePlanet Ventures, Integrity Partners and Peninsula Capital, to name a few). It has not been disclosed how much was raised in the last round which included Google Inc. However, the investment has been enough to get the company to profitability this year.

As a result, the company is not looking for additional financing.

"We are profitable -- there's no pressure to go public," co-founder and Chief Executive, Robin Li told Reuters' Jennifer Tan in an interview on Wednesday. "Quite a lot of investment bankers have approached us [to take us public] but we have not selected one yet."

Baidu's sales are soaring in part from sponsored links similar to those offered by Google and Yahoo!.

When someone in China does a search via Baidu.com, they are presented with relevant results, as well as the name and Web site link to advertisers attempting to capture the attention of Baidu's audience.

This is where the majority of Baidu's revenue is generated.

"We expect our revenues to more than double in 2004 from a year earlier," said Li.

"Looking ahead, it's hard to say -- it really depends on how quickly the market matures and how many small and medium enterprises realize the promotional power a search engine can bring to them, and our best guess in 2005 is about double (from 2004)," added the thirty-six year-old, Li.

Last month, Baidu's Chief Financial Officer Shawn Wang told Reuters the company had been boosting revenue by about 150 percent in each of the last two years as its paid search services gained popularity.

According to the Ministry of Information Industry, China's Internet users are estimated to grow to 111 million this year, from 81 million in 2003.

According to iResearch, the country's search market will be worth an estimated $50 million this year and its expected to grow to $200 million by 2006.

A recent iResearch survey found that Baidu is nearly twice as popular among Chinese Internet users as Google, with a market share of about 49 percent.

Baidu's Competition

Baidu's primary competition is a Yahoo!-owned operation in China called 3271 Network Software.

Late last year, it was reported that Yahoo paid $120 million for 3721.

In America, as well as China, Yahoo! is one of a number of Internet operators cashing in on the explosive growth of Web users and their willingness to spend money on online services.

Yahoo! Profits Triple

Meanwhile, Yahoo announced on Tuesday that they collected $104.2 million from 7.6 million subscribers during the third quarter. Currently, their revenue sources include selling its online audience services like high-speed Internet access, fantasy sports leagues and matchmaking.

About 4.2 million subscribers generated $79.4 million in fees at the same time last year, an AP Report stated.

"Yahoo is definitely in an enviable position and we have many more exciting opportunities ahead," Yahoo! Chairman Terry Semel told the AP.

The Associated Press reported:

Yahoo! Inc. announced its third quarter net income rose from $65 million in 2003 to $253 million in 2004 and an increase in revenue from $357 million to $907 million.

Yahoo! said its profits are due to the revival of online advertising and investment in its rival Google Inc.

Sales in Yahoo's advertising business more than tripled to $765 million, due its acquisition last year of Overture Services Inc., where it distributes text-based ads.

Google - One Company's Sole Source of Ad Spending

As Baidu, Yahoo! and Google duke it out in attempting to attract additional advertisers in China, one company in America is investing all of its ad dollars in one of these three entities.

Rugged Elegance, a lifestyle media business with a monthly following of nearly 400,000 unique visitors, is on a mission to help customers find the best e-commerce purchases on staples, aka "mass produced products" and gifts, so that they have that much more to spend on luxury, one-of-a-kind products and services.

The challenge for advertisers like Rugged Elegance: Google is paid continually while the distributors who sell and ship the recommended products pay Rugged Elegance thirty days after every quarter. This 120-day disparity makes balancing cash flow quite difficult.

Ideally, Google, Yahoo! and Baidu would step up to the plate and create incentives for these large distributors to pay their affiliates more regularly.

If they did, there would be more advertising dollars to invest in their interests.

Here's to healthy, adventuresome, soulful and well balanced cash flow living!

~ Jennifer King