Shares of Sohu.com (NAS: SOHU) opened nearly 6% higher this morning. The Chinese dot-com pioneer posted better-than-expected quarterly results. Revenue climbed 23% to $285 million. Adjusted earnings fell 40% to $0.77, as the company invested in new growth initiatives that won't pay off right away, but it could've been worse. Sohu's bottom-line showing was still an 80% sequential improvement. Perhaps more important, analysts were only holding out for an adjusted profit of $0.46 a share on $275.9 million in revenue.

However, a few items into Sohu's report, we see that Sogou is on fire.

Sohu.com's fledgling search engine saw its revenue soar 102% to $32 million. Keep in mind that during those same three months we saw China's leader Baidu.com (NAS: BIDU) grow at just a 50% clip.


Is Sogou growing its revenue twice as quickly as Baidu a fluke? Not really. Sogou has been a speedster for some time, and it will continue to smoke Baidu during the current quarter. Sohu sees revenue at Sogou climbing 74% since last year's fourth quarter to $40 million. Baidu, on the other hand, is targeting just 38% to 42%.

At a time when the market's concerned with Qihoo 360 (NYS: QIHU) eating into Baidu's market share since its summertime launch, are we eyeing the wrong threat?

No!

Let's put this into its proper perspective. Sohu's Sogou is blazing away in the monetization process, but it's still a sliver of Baidu. The $37 million that it generated in the third quarter is 3.7% of the $994.65 million forecast for Baidu. At the midpoint of Baidu's top-line outlook for the current quarter, Sogou's $40 million is still just 4% of Baidu's forecast of $994.65 million.

Qihoo 360 has a larger share of the search market than Sogou, but it's actually well behind in terms of generating revenue from search.

Either way, Baidu was never going to own the entire search market. Until someone grows to the point where it's making a sizable dent -- and that certainly isn't Sogou just yet -- Baidu will be just fine.

Betting on China
Want to learn more about the Middle Kingdom's Internet leaders? Check out The Motley Fool's premium report on Baidu, which dives deep into China's dot-com darling. The premium research comes with a year's worth of updates. Just click here to get started.

The article Is This Baidu's Next Problem? originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Baidu. Motley Fool newsletter services recommend Baidu and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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