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Baidu, China's biggest search engine, has quietly and successfully extended services to other countries in the developing world.
BEIJING, China — Everyone in China knows Baidu — the country’s biggest search engine, its very own, home-grown Google-killer. But outside China it’s far from a household name.
That's something the company wants to change. In a quietly ambitious plan, Baidu is taking its hard-won lessons from the Chinese market abroad in the hopes of becoming a major player the developing world.
In the last year, Baidu has quietly rolled out localized products in Vietnam, Thailand, Egypt, and as of late July, Singapore and Brazil, with new offices being built in Sao Paulo.
So far, most of these are adaptations of Baidu services that cater to older or less sophisticated users. In Brazil, users now can visit a version of Baidu’s Hao123 directory, which features links organized by category — movies, email, weather, sports, shopping, and the like. In Egypt, users can find an Arabic version of Baidu’s question and answer site, “Baidu Knows.” In Vietnam, Baidu offers Hao123 as well as a recently launched version of Tieba, which allows users to search social media.
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As a further measure of its seriousness, in July Baidu signed a partnership in Singapore to create a joint research lab on natural language processing for Thai and Vietnamese, as well as Arabic and Portuguese.
While it’s a modest start, Baidu’s billionaire founder, Robin Li says that the goal is to “become a universally recognized brand in over half the world’s countries.”
Why does Baidu think it can succeed? Partly, it contends, because it knows better than anyone else how to address the needs of novice users.
“We are a company that straddles two worlds,” says Kaiser Kuo, head of international communications at Baidu. “We have on the one hand very sophisticated users in cities like Beijing and Shanghai who are very first-world. But the bulk of our market is still very developing-world.”
With nearly 80 percent of China’s search traffic, Baidu's users include geeks as well as poor people and elderly Chinese who cannot type in pinyin, China's official romanization system.
“We really understand the common user,” says Wang Menqiu, head of Baidu’s consumer products. “Not the international, sophisticated user, but very, very normal people. Google tried to assume users take a lot of actions and want to make a lot of choices when they use their products. But in our products, we do it a different way. We first of all assume users are lazy and are naïve. And we try to deliver our products in the simplest way.”
Twelve years after it was founded, the Baidu of today is no longer seen simply as a Google knockoff, but a formidable internet titan in its own right, with revenues of $859 million in the first half of 2012. A darling of both tech and China bulls, its stock price has increased ten-fold since January 2009.
Many analysts remain optimistic about the company, despite a general slowdown in China’s economy. Aaron Kessler, an analyst for Raymond James, wrote in a note to clients that “Baidu is well-positioned for strong, long-term growth driven by continued internet growth in China, increased e-commerce adoption, search advertiser adoption in China and growth from non-search areas.”
Chi Tsang of HSBC echoed that view, writing that “improving economic conditions coupled with strong operating metrics” help make Baidu their “top pick in the China internet space.”
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Suiting its stature, the company’s headquarters are a landmark in Beijing's bustling technology district. Designed by the same architects who built the Olympics “Bird’s Nest” stadium in Beijing, from above, the structure evokes the shape of a search box. Outside, dozens of workers on break chat and amble around the driveway.
Inside, Baidu intentionally evokes the quirky openness of Silicon Valley, from which it draw some of its best talent. On the lobby ceiling, blue LED lights form an image of company a logo, a blue dog’s paw. The facility boasts a basketball court, waterfalls, a yoga studio, a gym, and a Western restaurant serving German sausages at small, attractive wooden tables. Workers are expected to address CEO Robin Li by his first name, and even high-ranking executives rarely have offices.
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Other details are unmistakably local. In the lobby, a red and black LED screen scrolls current stock prices in Shenzhen, Shanghai and Hong Kong, and displays the most popular search terms of the day. Snack machine are stocked with Chinese treats, like spicy fried peas. Meeting rooms are named after classical Tang-dynasty Chinese poems — ones on the second floor are given two-character names, those on the third floor have three characters, and so on.
One portion of the second floor is given over to huge, egg-shaped pods set aside for women, nursing mothers, or workers in need of a nap. The workforce tilts young, with an average age of 25.
Apart from overseas expansion, Baidu is looking hungrily to grow on mobile devices. In May, it launched a low-cost smartphone — the first in a string of cheap devices aiming to make Baidu as dominant in smartphones as it is on computers. And to gain further market share Baidu is offering its own "platform" — effectively an operating system, with a Baidu app store and free cloud storage — to run on other manufacturer's devices.
This is partly due to strategy, and partly to necessity. While Baidu's bread-and-butter business remains desktop search, it sees that China is rapidly becoming smart-phone centric. In the first half of 2012, searches on mobile devices in China exceeded those on computers for the first time. By 2015, according to a report by research analyst firm Canalys, 40 percent of the Chinese market is expected to be using smartphones costing less than $200.
But to keep its revenues flowing, the company will have to work hard. While Baidu has nearly 80 percent market share in browsers, it has only 34 percent of mobile searches. Plus, mobile search simply pays less. At the moment, only one percent of Baidu revenues come from smartphones.
This gap has some analysts concerned. Catherine Leung of Goldman Sachs wrote in her recent note that “barring significantly stronger uptake in its core desktop business, we think rapid mobile internet usage growth still poses challenges and hence maintain our Neutral [rating on Baidu.]"
Still, between mobile and international expansion, Baidu's managers say they are optimistic in the long haul.
“It’s still too early to talk at this point about how mobile search will generate revenue,” says Li Mingyuan, head of Baidu’s mobile and cloud services. "The macro trend lines are clear. The mobile internet story won’t be any less splendid than the story of the PC internet age."
Despite its promise, Baidu has had its missteps. The company drew criticism for an email that was leaked last week, revealing that four employees had been fired for deleting posts in exchange for money.