Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

As if a slowing economy, stricter advertising regulations and rising costs to attract users weren't enough, Chinese search engine Baidu is now having to contend with an interloper on its territory: Tencent.

The social networking giant on Wednesday highlighted how Baidu's membership of the B-A-T triumvirate of the country's most important internet companies -- Baidu, Alibaba and Tencent -- looks increasingly in jeopardy. Time then, to relegate the company to lower case: baidu.

Helped by its strength in gaming and continued push into mobile, Tencent posted profit that beat analyst estimates for the second consecutive quarter. But it's the company's stealth move into advertising that is set to upset the delicate, unwritten rule governing the relationship among the so-called big three.

Until now, baidu focused on ads (from which it derived more than 90 percent of its revenue), Alibaba had e-commerce (accounting for 85 percent of sales) and Tencent took social and gaming (70 percent of revenue).

Ad Fight
Tencent's advertising sales revenue has risen so fast in the past two years that it's now equal to 39 percent of the ad sales garnered by Baidu
Source: Bloomberg

But a massive 60 percent jump in online advertising sales to a record 6.5 billion yuan means that Tencent's ad revenue is now equivalent to 39 percent of baidu's.

The search provider's slowing sales growth -- thanks to the aforementioned regulatory and macroeconomic struggles -- is only partially to blame for that changing dynamic.

For much of its history Tencent was content to garner revenue through online games, helping consumers part with as much as $70 a quarter to play titles like World of Fantasy, Legend of Yulong and Moonlight Blade

Its messenger platforms, QQ and Weixin/WeChat were simply vehicles for connecting users to games. But that dynamic has changed in recent years, with Tencent aggressively monetizing its more than 800 million Weixin accounts, and using the platform to serve up video content including its exclusive rights to NBA games in China.

From there, its timeline feed, known as Moments, a mobile news app, and corporate customers' Official Accounts have all proved lucrative places to sell ads.

That's left baidu flat-footed. Its desperate attempt to capture a share of the online-to-offline market -- which includes deliveries, ride-sharing and theater tickets -- has burnt a through a lot of cash -- but so far failed to provide the massive returns such investment ought to deliver. 

Little Baidu
China's biggest search engine provider used to be a giant. But now its market cap has been dwarfed by B.A.T. rivals
Source: Bloomberg

With limited traction in social, games or e-commerce, baidu has failed to innovate its business model and is left depending on a troubled search-ad model that's at the mercy of regulatory whims.

Clearly, Tencent's move into advertising is neither a fluke nor a one-off. That will only continue to weaken baidu. In fact, with a market value that's only a quarter those of the other two members of the triumvirate, baidu can no longer really be said to be a peer. Better rename that triumvirate "b-A-T."

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Tim Culpan in Taipei at

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Edward Evans at