In America, the streaming video advertising business is dominated by two companies—Alphabet (ticker: GOOG, GOOGL) and Facebook (FB). But in China, where market size and growth rates could potentially be much more lucrative for investors, the competition in streaming video is extremely fierce.
A new report from Bernstein focused on search engine giant Baidu (BIDU) detailed Baidu’s video battle with rivals Alibaba Group Holding (BABA) and Tencent. Together, Baidu, Alibaba and Tencent account for 71 percent of total online video streaming in China. Baidu’s iQiyi platform is the market leader with 31 percent share, with Tencent Video (24 percent) and Alibaba’s Youku (16 percent) close behind.
Last week, Bernstein analyst Bhavtosh Vajpayee wrote that, while American investors love to compare Google and Biadu, iQiyi isn’t on YouTube’s level just yet.
“Within video, none of China’s video platform’s are anywhere close to the level of YouTube’s dominance yet, and indeed a three-way struggle for leadership is currently on, with several smaller platforms still in the mix,” Vajpayee says.
There’s no question that Baidu has a powerful share in the online search category in China, but it has nowhere near the breadth of Google’s dominance in other categories, such as video.
According to Bernstein, the time Chinese internet users spend browsing social networks, watching online video, gaming and shopping online more than doubled from 2010 to 2016. Time spent on search is down 33 percent.
In an effort to break away from the pack in streaming video, Baidu recently signed a licensing deal with American streaming service Netflix (NFLX) after Netflix spent years trying unsuccessfully to break into the Chinese market on its own.
Vajpayee says the Netflix deal could help establish iQiyi as the dominant video platform in China. Baidu has also recently done a great job of acquiring a handful of popular original shows at relatively cheap prices, he says.
“These are hidden skills that are often ignored by the markets, but could help differentiate the Baidu video platform in coming years,” Vajpayee wrote.
Vajpayee said Baidu has an opportunity to break away from the pack in video and other categories outside search. But for now, the stock’s valuation is…
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