Baidu is one of China’s BAT trio of tech giants, along with Alibaba and Tencent. While it is generally regarded as the “Chinese Google”, Baidu manages a large collection of services that caters to all aspects of the largest online population in the world, and continues to grow at a high rate. As with Chinese online platforms, Baidu is predominantly domestically focused, with only a small percentage of revenues being derived from overseas. However, Baidu is making moves to establish itself abroad and take on the likes of Google and other western tech giants.
Baidu Key Facts:
- Baidu is the market leader in China’s search engine market.
- It is facing competition from Alibaba & Tencent, as both are diversifying their business models through acquisitions.
- Baidu’s acquisition strategy is firmly focused on user migration to mobile. This will continue in 2014, even at the expense of 2014 growth.
- After acquiring stakes in a variety of tech firms in China, investors will need to see the results in the company’s bottom line.
- Baidu is moving into wearable technology and expanding overseas, with services in Thailand, Egypt and Brazil.
Baidu’s Business Model
Baidu’s core business is a search engine provider. It allows users to search websites, images, videos and news, much in the same way that a western search engine would, such as Google. The vast majority of Baidu’s revenue comes from online marketing, and as of the most recent earnings report, has about 446,000 active online marketing customers.
While Google has a dominant position in most countries, East Asia still remains one of the few places where it isn’t the most popular search engine. South Korea’s most popular search engine is local firm Naver, Japan and Taiwan favor Yahoo! Japan and Yahoo! Taiwan, and China’s most popular search engine is Baidu. These countries tend to favor local alternatives, and this is prevalent in the Chinese market, albeit partially due to internet restrictions. For example, without using a VPN proxy, my access to Microsoft’s Bing has never been slow or unable to load. However, my access to Google varies greatly, and quite often is simply too slow for me to use.
Within China, Baidu’s main domestic competitors are Tencent’s SoSo, Sohu’s Sogou, Qihoo’s 360 Search and NetEase’s Youdao. Nevertheless, Google China is still popular in China, and is Baidu’s main competitor in the market. Baidu has a dominant search engine market share in the world’s largest online nation. In a country with a population of 1.4 billion, the number of people with access to the internet is 568 million. This gives an internet penetration rate of 42.3%, which is substantially lower than that of the United States and Japan, 81% and 79%, respectively.
Depending on which metric you use to measure market share, Baidu currently controls between 60% and 80% of China’s search engine market. Based on revenue over the past eight quarters, Baidu’s market share has risen gradually from 79.5% to 81.7%, predominantly at the expense of Google China. Baidu is predominantly based in China, and has no English service, meaning that its service is designed for mainland Chinese users. However, it has made inroads into expanding overseas, particularly with its Baidu Japan service, although this has been generally regarded as a flop. Baidu Japan has less than 1% of the search engine market share in Japan. It is currently targeting South America, the Middle East and South East Asia for expansion.
Aside from the flagship search engine service, Baidu has a wide variety of services to offer to users. Baidu PostBar is the world’s first and largest Chinese language searchable online community platform; Baidu Knows is the world’s largest interactive knowledge sharing platform, similar to Yahoo Answers; and Baidu Encyclopedia is the world’s largest user generated Chinese language encyclopedia, very similar to Wikipedia. Baidu also has a maps service, which is very similar to Google, although Google Maps in China tends to be incorrect, even in Shanghai. It has a Music service which allows users to stream music, similar to Spotify; a proprietary Cloud storage service; a translation service; and its own social media space. Slightly more obscure services include a search engine specifically for senior citizens, patent searches, and a missing persons search service.