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

Shen said both ventures will not significantly contribute 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 quickly and is already meaningful. I hear people saying that this makes up 30 to 40 percent of Google's revenue, but it's not that big for Baidu ... eventually it might grow to that level," Shen said.

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China is the world's largest Internet market by users, with 420 million people online. Its search industry, in which Baidu has a 73 percent market share by revenue, was worth 3.13 billion yuan ($470 million) in the third quarter, according to iResearch. Earlier this month, Baidu invested in TG.com.cn, an e-commerce website for home decorations. At the end of the third quarter, Baidu had 5 billion yuan in cash and equivalents on its balance sheet.

"We are definitely more open-minded than we were a year ago when we looked at merger and acquisition opportunities," Shen said.

"These are exciting times now when you look at e-commerce and wireless ... With our leading position as a search site and the resources we have on our books ... it makes sense for us to look at these more open-mindedly," he said, adding that Chinese companies will be the focus of its acquisitions and investments.

Baidu is also eyeing new growth in contextual advertising, which uses a webpage's keywords to choose the ads displayed on the page. Shen said Baidu's contextual ads platform will see no big boost in the near term but that the company is upgrading the system.

"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.

Reuters