Baidu valued more richly than Google

China has the second-largest Internet audience in the world, yet less than 10% of the company's population is online (only 100 million residents surf the Web). Baidu.com, China's biggest Web search company, is the world's sixth-most trafficked Web site. During the first half of 2005, Baidu earned $1.8 million on revenue of $13.6 million. On August 5th IPO, the Beijing-based company's shares (BIDU) closed at $122.54 on the Nasdaq Stock Market, a 354 percent gain from its initial public offering price of $27. Investors valued Baidu more richly than Google, when comparing market value to last year's sales. Baidu's 2004 price-to-sales ratio was 279 -- based on revenue of $14.2 million -- well above Google's comparable multiple of about 26 -- based on revenue of $3.2 billion. How can investors justify Baidu at even five times greater valuation than Google or Yahoo? With about 32.3 million shares outstanding, the company with $8 million in revenue in its most recent quarter is carrying a market cap of more than $4 billion.