Baidu Inc forecast revenue well ahead of Wall Street's expectations as major advertisers shrugged off fears of a Chinese economic slowdown, and its shares rose 7 percent.

The search engine, which controls more than three-quarters of the world's largest Internet market, forecast revenue of $611.1 million to $626.6 million in the third quarter, outpacing Wall Street's expected $569.6 million.

Baidu, which has increased its focus on online video and e-commerce, has steadily grown its search market share since Google Inc curtailed its operations after a high-profile fallout with Beijing over censorship.

Analysts said it was benefiting from increased spending by its large advertising clients in 2011.

Baidu is rapidly making inroads into other markets from online music to video, and it is vying with Youku, Tudou and Ku6 Media for the rights to stream content.

Last week, Baidu inked a landmark deal with record labels to stream music, marking a victory for a global recording industry that has battled piracy for decades.

The search market is growing very strongly. It's a rising tide, said Collins Stewart analyst Mayuresh Masurekar. But Baidu has a lot of irons in the fire. It has a lot of non-search initiatives that are rounding out its growth.

Baidu's 150 million users in online video, after only about a year, are generating advertising and premium subscription revenue, he said.

Last month, Baidu, whose name comes from an ancient Song Dynasty poem, said it was buying China's leading travel website, Qunar.

But competition is intensifying. Google's exit from that market has made room for other competitors from Sohu.com and Alibaba Group to Tencent Holdings.

STRONG NET

We benefited from strong traffic growth and improved monetization, said Robin Li, Baidu's chairman and chief executive officer. We were especially encouraged with the strong spending from large customers.

The company said its second-quarter net income had almost doubled to $252.6 million, or 72 cents per American depositary share, beating analysts' expectations, on average, for 66 cents per depositary share.

Second-quarter revenue rose 78.4 percent to $528.4 million, surpassing analysts' forecasts, on average, for $502.6 million, according to Thomson Reuters I/B/E/S.

Chinese online advertising is estimated to be growing at about 45 percent per year, but some analysts have said companies will be tightening marketing budgets in anticipation of slowing economic growth.

Baidu's new, simplified Phoenix Nest platform for advertisers is expected to help retain key customers.

Shares in Baidu, which have risen more than 60 percent so far in 2011, were trading at $167.06 after hours after closing up 1.65 percent at $156.54 on the Nasdaq.

(Reporting by Edwin Chan and Sayantani Ghosh; editing by Bernard Orr)

China