The Baidu Success Story
The relentless aspiration to create something new and different in spite of all odds often leads to success. The success of Baidu, the Chinese version of Google, is nothing short of extraordinary, achieving tremendous growth and success what no other tech company could emulate till date, somewhat akin to beating Yahoo and Google on home turf.
With Baidu founder, Robin Li’s dedication and vision, the company continues to gain considerable market share in China, despite facing heavy censorship and strict laws from Chinese government, which usually gives precedence to advertising instead of pertinent search results. By allowing the internet watchdogs oversee its operations, Baidu has been able to gain the support and goodwill of Chinese government, which in turn, has increased its dominance in Chinese market. On the other hand, foreign internet companies, such as Google, Yahoo and Bing, are regularly blocked and are subjected to censorship by the government, thus hindering their growth in China.
1999: The Story Begins
In 1994, Li, when working for Down Jones, started researching on search engine algorithms. In 1996, he developed RankDex, an algorithm to rank web pages. At the same time, Larry Page and Sergey Brin (founders of Google) started creating a similar algorithm, called PageRank, to be used in search results of Google. Li accused Brin and Page for copying his idea. He claimed that he filed a patent for RankDex in the U.S. before the PageRank patent of Google in 1996.
In 1999, Li went back to China, and along with Eric Xu, founded Baidu. Li and Xu were able to raise $1.2 million from two venture capital firms, Peninsula Capital and Integrity Partners, situated in the Silicon Valley. They used the money for the initial development of creating Baidu. In Sept 2000, Li and Xu received further monetary help by other venture capital companies, such as IDG Technology Venture and Draper Fisher Jurvetson. Both the firms pumped $10 million into Baidu, which further strengthened the cause of the startup.
In the beginning, Baidu offered search results and search engine optimization services to Chinese websites, but after a brief period, it focused on creating its own dedicated search engine. However, some investors and stakeholders opposed this shift, asserting it will turn consumers into rivals. But, Li persisted with this approach after observing the success of Overture Services Inc., a tech firm located in California, which sold advertisement space to clients related with search results.
Thus, in 2001, Baidu started its own website, Baidu.com. Though, the site almost looked similar to Google’s home page, it also had a huge advantage – even before Google introduced pay-per-click (PPC) campaign. The site allowed its clients to bid for advertising space and then remunerate Baidu every time an advertisement is clicked. This business strategy thrived and facilitated the growth of small and medium size businesses in attracting increased web traffic.
Baidu’s Journey So Far
The company faces several challenges and hurdles ahead. Their management constantly faces pressure to achieve their predetermined business goals every quarter. Their target revolves around surpassing their competitors by a big margin. However, it’s easier said than done because both Yahoo and Google are mulling to invest billions of dollars in Chinese internet businesses. Yahoo has already merged its operations with a Chinese online commerce company Alibaba.com, while Google is keen to build a research center in Beijing.
Market analysts say that in spite of their brand name and money, global U.S. internet firms have not been able to outperform Chinese internet companies or take the number one position in internet business in China. Many experts point that indifference to foreign businesses, strong resilience and even perseverance to foreign competition has led to several overseas companies being knocked out of China. This fundamental difference coupled with strict censorship have led financial experts in believing that Baidu will continue to hold its numero uno position in China and the real competition would be among businesses to secure the number two spot instead.
In the first quarter of 2006, Baidu’s revenue rose 190 percent to $49.9 million, with profit rising to incredible 550 percent, at $11.72 million, thanks to young generation of internet users, who often get attracted to download movies, music, videos and search for popular images.
Baidu had to face its share of legal problems as well, such as the lawsuit by music company Warner, asserting that Baidu violated copyright laws. Baidu’s lawyers contended that the company cannot be held guilty for just offering links to other websites.
The Current Scenario and the Future
Baidu is still going strong in China by adhering to its corporate policy of providing optimum information in the form of dedicated search results to the people in Chinese language. Li recommends its employees to listen to their users’ wants and needs carefully to collect and streamline all the information users want to access.
Apart from constantly developing improved products and services, and serving individual users, Baidu’s marketing services and products use a unique Pay-for-Performance (PP) model, which the company believes is a more measurable and cost-effective model than the conventional flat charges levied by online advertisers. Extending this business concept, the company forged a powerful alliance with Microsoft Corp in December 2006 in paid search services.
However, as the Chinese government wants to develop its independent search engine in partnership with Xinhua press agency and China Mobile, the problem for the business rivals is that Baidu has other services to offer, such as Baidu Youa (e-commerce platform), Baidu Baike (Wikipedia lookalike), Baidu MP3 (music platform), and Baidu Zhidao (Q&A platform).
Considering the massive rise of Baidu, it certainly looks like this Chinese company is all geared up to conquer newer heights of excellence.