another sort of "Phoenix Nest" revolution for contextual

Baidu was the only Asian name in the top 100 holdings of the world's 30 biggest hedge funds in the third quarter of 2010, according to Thomson Reuters' StreetSight. The hedge funds increased their holdings of Baidu by roughly a fifth in the third quarter from the second quarter, the data shows.




Although Baidu has made forays into e-commerce and online video this year, its focus will still be search functions, Shen said.

Baidu has a tie-up with Japanese online retailer Rakuten Inc 4755.Q to operate an online shopping mall, and also formed Qiyi.com, a joint venture offering licensed online video content with Hulu backer Providence Equity.

Shen said both ventures will not contribute meaningfully to Baidu's bottom line in the near term, but will raise ad dollar spending among its major clients, especially for e-commerce.

"It's growing very fast; it's already meaningful. I hear people saying for Google it is 30 to 40 percent of their revenue, but for Baidu it is not that big... eventually it might grow to that level," Shen said.




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"It is exciting times now when you look at e-commerce and wireless...With our leading position in search and the resources we have on our books...it makes sense for us to look at these more open-mindedly" he said, adding the focus of acquisitions or investments would be mostly Chinese companies.

Baidu is also eyeing new growth in contextual advertising, which uses a web page's keywords to choose what ad to display on that page. Shen said there will be no big boost for its contextual ads platform in the near term but that the firm was upgrading the system.

"Contextual is relatively small for us, it's much bigger from our understanding for Google globally and China," Shen said.

"The way we think about it, we need another sort of "Phoenix Nest" revolution, because Phoenix Nest is for paid search advertising, but we need a similar thing for contextual and when that happens we will see huge improvement in contextual revenue," he said.