Qian+Strategy+report

众里寻他千**百度**，蓦然回首，那人却在灯火阑珊处; (In the audiences seeks him a lot of, suddenly looks back on, that person actually in lights waning place. **百度** means SEARCH.)

TO: Proximity music team FROM: Dou Qian DATE: January 7, 2010 SUBJECT: Baidu strategy analysis

Here is my assessment of the strategy used by Baidu, the favorite Chinese search engine that enables users to find websites, audio, video, news and image files based on key word search terms. Baidu holds 64% of the search engine market in China and dominates the online music and video market (Digital East Asia; 2010). Gen Y users have adopted Baidu as their primary source for search engine because Baidu uses Chinese characters of the search engine website and it has insight about Gen Y interests.


 * Profile**

“Baidu” is pinyin (pronunciation for non-Chinese speakers) for the Chinese characters for the name of the search engine website. Baidu was formed in 2000. It is a full-service search engine that covers internet web sites, images, and audio files. Furthermore, it offers 57 other search services, including a collaboratively built web based encyclopedia. Unlike Bing, the Baidu web site is written exclusively in Chinese characters.

Baidu’s revenues come from two sources:

• Online marketing and other services. • Consumers who subscribe to Baidu's Ads service.

In 2009, the Chinese search market had an estimated value of $293 million (Digital East Asia; 2010). Baidu has experienced fast revenue growth from $117 million in 2004 to $2,552 million estimated from 2008 (wikinvest). However, the percent of revenue from "Other Services" has dropped from nearly 60 percent to nearly zero percent from 2002 to 2006. Financial Analysts consider Baidu (located on the NASDQ exchange) to a "Buy" and "Strong Buy" stock.


 * The Competitive Landscape**

Baidu is the dominant search engine used by most Chinese internet users. However, popular and important non-Chinese search engines like Yahoo, Google, and Bing are available to Chinese internet users. Yahoo and Google, which are the major competitors of Baidu, offer Chinese character as well as English. Google did not arrive in China until 2005, when it agreed to abide by the Chinese “Golden Shield Project” which prevents Chinese access to some controversial web sites located outside of China.

Baidu’s main advantage is that it has links to many video and audio web sites. Surprisingly, Yahoo, the oldest modern search engine has not penetrated the Chinese market in any significant way. Yahoo is, however, the number one search engine used in Taiwan and Hong Kong (Digital East Asia: 2010). And, Microsoft’s Bing search engine has just recently been introduced to China and does not provide a Chinese character web site.

The market for search engines in China is booming. China already has the largest number of internet users in the world: more than 350 million netizens (Digital East Asia; 2010). Most urban internet users gain access using broadband fiber optic systems.


 * Baidu Strategy**

Baidu’s strategy is to keep its dominant position in the Chinese market as well as expending its operation into new markets in other Asian countries such as Japan and by offering many new marketing services. Baidu uses innovative products to attract and to retain a larger user base, attract additional customers and increase spending per customer. Also, Baidu continuously upgrades its technology to support increased traffic and expanded services to maintain customer loyalty.


 * Gen-Y implications**

The typical member of Gen-Y in China behaves very differently than his or her parents. The period between 1970 and 2000 when Gen-Y was born has been a very prosperous period, Chinese Gen Y have received most of what they want without asking. They have learned to use the internet very well and are very skilled at the use electronic devices to communicate with each other. Baidu continues its dominance in the use and understanding of the Chinese language and its dialects. It provides its Chinese Gen-Y users with the “western” ideas, music, and video they like. I think Baidu should continue to look for new markets and make its web interface compatible with mobile phones.


 * References**

Herman, Doug, “Baidu, Google, Yahoo and Bing: 2009 Was A Battleground In Chinese Search”, Digital East Asia. Retrieved January 6, 2009 from [] Wikipedia, searching for “Baidu”. Retrieved January 6, 2010 from [] Wikipedia, searching for “Google China”. Retrieved January 6, 2010 from [] Wikinvest, Baidu.com (BIDU). Retrieved January 9, 2010 from [] Baidu, Inc. (BIDU) (2010), Analyst Opinion. Retrieved January 9, 2010 from []