Baidu (NASDAQ: BIDU) was once considered a conservative play on China's growing tech industry since it owned the country's top search engine and a wide moat of popular portals and apps. However, Baidu's stock tumbled about 40% over the past 12 months as the economic slowdown in China, aggressive competition in the ad market, and a paradigm shift from traditional search engines throttled its growth.
China's economic slowdown caused many domestic companies to slash their ad budgets and pivot their spending toward higher-growth platforms like ByteDance's TikTok and Toutiao. As a result, ByteDance recently overtook Baidu as the second-largest digital advertising platform in China after Alibaba (NYSE: BABA), according to consultancy firm R3.
The introduction of in-app search engines in Toutiao, Alibaba's UC Browser, and Tencent's (OTC: TCEHY) WeChat also challenged Baidu's search engine. Sogou (NYSE: SOGO) also gained ground by integrating voice searches into its popular mobile keyboard. Meanwhile, Baidu's growing dependence on iQiyi for revenue growth crushed its margins because the streaming video unit was still unprofitable.