Baidu.com (BIDU - option chain) shares are rising today on reports that Google (GOOG) advertisers in China have been advised to switch to its rivals, including Baidu and Sohu.com (SOHU). This is on the heels of this weekend's report that Google will shut down its Chinese search engine rather than bow to the countries strict censorship rules. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on Baidu.

BIDU opened this morning at $570.48. So far today the stock has hit a low of $563.20 and a high of $628.50. As of 12:35, BIDU is trading at $581.05 up $30.81 (5.6%). The chart for BIDU looks neutral and S&P gives BIDU a neutral 3 STARS (out of 5) hold ranking.

Unless you already have a major foothold in the search engine market – or an amazing, disruptive technology that can make the world take notice – there isn't much point in staying. Competing with Google (NASDAQ: GOOG) is hard enough, even when you're Yahoo (NASDAQ: YHOO) or Microsoft (NASDAQ: MSFT) ... and, apparently, when you're IAC/InterActive Corp (NASDAQ: IACI). Barry Diller is ready to give up Jeeves, but only if asked nicely.

Diller's presence in the search space is Ask.com, ranked #4 behind Google, Yahoo and Microsoft's Bing. With a substantial gap between first and second, fourth barely registers at all. Ask.com has only a 2% U.S. market share, according to Hitwise, more than 60 percentage points behind the industry leader.

The number two search engine in the United States turned in a fantastic third quarter, far ahead of expectations. Cost-cutting, layoffs and business divestitures led to a surge in Yahoo's (NASDAQ: YHOO) profits and a 4.8% increase in share price in extended trading on Tuesday evening. Net income more than tripled to $186.1 million (13 cents per share) from the third quarter of 2008's result of $54.3 million (4 cents a share). Sales (exclusive of fees passed to partner sites) reached $1.13 billion, slightly above the $1.12 billion expected by analysts, according to a Bloomberg survey.

With the advertising market in rough shape and competition from Google (NASDAQ: GOOG) continually rising, Yahoo refocused on its core properties: the home page, messaging and mobile services. The company trimmed what it didn't need, which is why it was able to boost its earnings even with a decline in revenue. Increased ad revenue from auto manufacturers, travel companies and consumer product manufacturers also helped.

Yahoo's chief financial officer, Timothy Morse, says that the company's markets are "starting to stabilize." Of course, Yahoo itself must be doing something right: its share price is up 41% this year.

Some people join wine-of-the-month clubs. There are plenty of other programs out there, too, where your credit card is hit every month, and your purchase is sent to you directly. If only such programs were available for Google (NASDAQ: GOOG). . . .

The company's CEO, Eric Schmidt, said Wednesday that Google plans to pick up a small company a month as a way to get its acquisition head back in the game. With the worst of the recession behind us, Google believes, this is a great way to get moving.

After months of speculation, several media reports say that a deal to create a joint venture on search between Yahoo! (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) may be announced as early as today.

Details of the transaction make the much-anticipated partnership seem immensely complex, which could undermine its future. Many analysts had expected Yahoo! to get up-front cash payments for putting its search business together with Microsoft's. That will not happen. The two firms will split the revenue from ads sold on their sites. Microsoft's Bing search technology will be the platform for the venture, but Yahoo! will sell the ads.

Google (NASDAQ: GOOG) isn't invincible. The search and online ad giant is expected to report lukewarm growth for the second quarter today because of a brutal market for advertising and redoubled efforts by Microsoft (NASDAQ: MSFT) to own a bit more than its meager share of the online market.

Good news would have to come in the form of a better mousetrap for growing Google's ad market and ways to keep the Redmond machine from tripping it up. Ultimately, analysts are looking to see how Google can get back to the double-digit growth that used to be a given.

Yahoo Inc (NASDAQ: YHOO) claims not to be under pressure to ink a search deal with Microsoft (NASDAQ: MSFT). You know what that means ...

The two distant followers in the search engine space were considering a partnership, but Microsoft's newly released Bing search engine raises questions as to how committed Microsoft would be to a deal. Yahoo CEO Carol Bartz was quick to explain, according to Reuters, that "Yahoo doesn't have to do anything with Microsoft about anything" and that it is "a damned big, important site."

The benefits of the deal are salient, mostly involving scale and increased monetization of Yahoo's search service. The second largest search company estimates that it would save up to $700 million in a year through the Microsoft partnership.

Even though Yahoo is "damned big," Bartz believes that the acquisition of smaller companies that could be folded easily would be a good use of the company's cash.

Goldman Sachs has upped its share price estimate on Google Inc. (NASDAQ: GOOG) to $486, an increase of 17%. The analysts cite both search query growth and improvements in emerging markets coverage as the reasons for giving a nod to the dominant player in the online search business. The higher estimate implies that Google still has plenty of room to grow, which leaves plenty of upside for investors.

On a per-share basis, Goldman Sachs pushed its earnings forecast for the search giant 2% higher for this year – to $21.30. Per-share earnings estimates for 2010 were increased to by 8% to $23.36, and the 2011 estimate is now $27.02 (up 12%).

Analysts at Pali Research today started coverage of Baidu.com, Inc. (NASDAQ: BIDU) with a Sell rating and a $90 price target. The brokerage firm cited "short- to mid-term uncertainties," which it says outweigh current opportunities for the Chinese Internet-search titan.

Chief among those uncertainties is Baidu.com's "controversial" business model. The search engine has recently come under fire for hosting search listings paid for by unlicensed medical and pharmaceutical concerns. Last week, the company added to Wall Street's concerns by slashing its fourth-quarter revenue outlook.

Pali Research joins the majority of analysts with its downbeat opinion of Baidu.com. Zacks reports three Holds, one Sell, and one Strong Sell, compared to just two Buy or better ratings. While the shares have already shed 70.8% year-to-date, Pali's $90 price target suggests that the brokerage firm expects additional downside. This estimate represents a discount of 21.1% to the stock's closing price on Friday.

Despite BIDU's negative price action, option players remain relentlessly bullish on the shares. During the past 50 days, traders on the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) have consistently purchased more calls than puts on this Internet issue.

With the shares up more than 1% in early trading today, the bullish case for BIDU looks curiously compelling. However, considering the company's cloudy fundamental outlook, it's unclear just how long the shares can rely on round-number support at $110 before succumbing to the effects of gravity once again.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Google's (GOOG) shares continue to be stuck below $500 where they have been since late February. Part of the reason for the fall is that comScore data showed that the number of people who clicked on ads at the big search engine was weak in January.

It looks like the stock will drop again as "click rates" for Google ads rose only 3% in February when compared with the figures for the same month last year. According to MarketWatch: "Google reported 25% growth in paid clicks in its fiscal fourth quarter ended in December. But comScore data released last month showed flat growth in Google's paid clicks in January." Now, investors can ponder another piece of bad news.

The easy answer to the Google data is that a recession is slowing down advertising activity everywhere. Google carries millions of ads in its AdSense program, so it would make sense that it should suffer some fallout.

But, the answer may be more troubling than that. Readers of Google's search pages may be discovering that the text ads next to the listings are from marketers trying to take advantage of people looking for information by clogging pages with related messages. As more people understand the system of targeting based on search results, fewer are willing to be sucked in by companies trying to reach them due to their behavior.

If the Google system of matching ads to search results is putting its customers off, that would be worse news than the effects of a recession.

Douglas A. McIntyre is an editor at 247wallst.com.

Apple, Inc. (NASDAQ: AAPL) was recently up $3.60 cents to $157.11.

AAPL is expected to report earnings per share (EPS) in mid-October. AAPL October option implied volatility is at 31 and November is at 39, below its 26-week average of 42 according to Track Data, suggesting decreasing price risk.

Google Inc. (NASDAQ: GOOG) was recently trading up $13.64 to $580.74.

GOOG is expected to report EPS on October 18th. GOOG October at the money 580 straddle is priced at $33.10. GOOG October option implied volatility of 31 is above its 26-week average of 27 according to Track Data, suggesting larger risk.

Volatility Index S&P 500 Options:

VIX decreased as Dow Industrials got above 14,000, down .59 to 17.39. The 10-day moving average was 18.78 according to Track Data.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Whether it matters or not Microsoft (NASDAQ: MSFT), Yahoo! (NASDAQ: YHOO), and IACI's (NASD:IACI) Ask.com are all beginning programs to keep users search data private. Yahoo! actually plans to make (subscription required) all user search data anonymous within 13 months of collecting it.

Personal information can be used to improve the search results that are sent back to users. But, Ask and Microsoft are trying to band together with a number of companies and advocacy groups to set a coherent policy for keeping data on individual habits and data private.

Cynics might view the new enthusiasm for privacy two ways. The first is that it is a move by companies with a small share of the search market to pressure Google (NASDAQ: GOOG) to improve its privacy standards. This could hurt the accuracy of the company's search service by taking away key data that allow results to be more accurate.

The other take on the move is that protecting privacy data is much like building "green" cars. Critics and government agencies are becoming more interested in keeping the "Big Brother" aspect of search at bay. People's habits should be private and not part of a large black box that tracks their habits to serve more targeted marketing messages or collect information on who is not paying taxes.

The best solution is probably for people who don't want their data collected to avoid searching altogether. Personal data makes search results better. People can't ignore that.

Douglas A. McIntyre is a partner at 24/7 Wall St.