Baidu Inc. has been advised by analysts on Monday, Aug. 23, to do more to expand its business as it is falling behind its domestic peers, Alibaba Group Holding Ltd and Tencent Holdings Ltd, in terms of revenue and profit, China Daily reported.
According to analysts, these efforts are important for Baidu to be able to maintain its position as one of the country's big three Internet giants.
In the second quarter, Baidu's net income dropped 34 percent to $363 million, which was less than one-fourth that of Tencent, one of the most profitable tech firms in the country.
Also during the second quarter, Alibaba had posted its strongest growth since 2014, with a 59 percent increase in revenue, year-on-year basis, at a time when Baidu was struggling with strict government regulations on online advertising.
Although Baidu is still one of the major players in China's online industry, the gap is widening between Baidu and its rivals Alibaba and Tencent in terms of profit and revenue, according to Vinsan Wang, an analyst at Tiger Brokerage Group, providing Internet brokerage business for U.S. and Hong Kong clients.
"In terms of profit, it is still ranked alongside internet firm NetEase Inc as the third biggest internet firm," Wang said.
"But it needs to follow Alibaba and Tencent's footsteps to seek more revenue sources and reduce dependence on its core search engine business," the analyst added.
Wang said that among the big three firms, Tencent is the most diversified player, which has been the leader in China's internet market for several years.
According to the report, Tencent earned 48 percent from gaming and 24 percent from the social networking business in the last quarter while Baidu earned 93 percent of its revenue from only one source, which is online advertising and marketing.
But Baidu still has extensive presence in the country's search engine industry and could influence consumers, according to Ma Qijian, an Internet researcher at Peking University. Baidu's mobile search service reached 667 million monthly active users, as of June.
"But it has been slower than Tencent and Alibaba in taking advantage of the opportunities brought by the mobile internet era. As a result, Baidu is finding it increasingly difficult to develop a presence in new areas such as food delivery and mobile payment in which Alibaba and Tencent have already become established players," Ma said.
On Monday, both Tencent and Alibaba's market values reached more than $240 billion, while Baidu had a valuation of only around $61 billion.
"Baidu has great potential in cutting-edge technologies such as artificial intelligence and self-driving vehicles, but it takes years before these products enter into commercial use, and it remains to be seen which one of the three firms will have the last laugh," Ma added.