Seek the business models of others and thou shalt find. Baidu, China’s biggest search engine, now has a near monopoly on the country’s internet search business thanks to Google’s retreat to Hong Kong in 2010. But, despite this dominance, investors have higher expectations. The company may have announced another strong set of annual results last week but investors cut 3 per cent from the share price, denting its 22 per cent growth this year.

One reason is that its sales estimate for this quarter represents around a 5 per cent fall from last quarter. Investors may also be less excited about Baidu’s newest idea to make money from mobile search. Here it only has one-third of the market by traffic volume, far less than the four-fifths it owns of the broader search market by sales. And in mobile it faces Easou, a mobile search specialist and potential Nasdaq listee. Further, the earnings potential is less assured. While mobile search traffic volume is growing by around a half annually, this is unlikely to be matched by revenue growth – mobile users are more prone to search for an address than buy a new pair of shoes. That makes the average value per click on a mobile lower than on a computer.

Baidu, however, can afford to take a hit to expand into mobile. Its operating margins are a whopping 50 per cent – half as much again as US peer Google. But shareholders should not become fixated on Baidu’s mobile ambitions; its core search business is still well placed. In China, online advertising spend is forecast to grow at 40 per cent annually for the next three years, estimates Deutsche Bank. And Baidu’s 486,000 advertisers, up a fifth from 2010, still account for just 1 per cent of China’s small and medium-sized companies. These advertisers are also spending more. Payment per advertiser picked up by one-half in 2011. Little wonder Baidu’s shares trade at 31 times this year’s expected earnings – twice Google’s valuation. But Baidu has to deliver what investors seek.