Lonnie Hodge, who I would fairly say is something of a fan of Baidu (NASDAQ:BIDU), takes the search company's CEO Robin Li to task over his failure to show up to do his keynote at last month's ad:tech confab in Shanghai, ostensibly for a "sore throat." Most of the attendees to whom I spoke shared varying degrees of pique that Li didn't show up, and Hodge in particular sees this as emblematic of Baidu's disdain for Cluetrain-style engagement:
Baidu, or any company, would do well to join the party (not that one...) and join in on the many conversations, those that honor AND those that harangue, which can only make us better business people, more responsible netizens, and decent global citizens.
The Credibility Problem
Baidu has had its share of problems of late, extending from allegations about driving traffic through - and cashing in on - illegal music downloads to growing questions about the validity of its organic search results (given Baidu's apparent willingness to hawk those results to the highest bidder.)
These problems are not purely academic or legal. There is a small but growing negative buzz about Baidu among Chinese users and in the local media, some of it focusing on non-issues, but a growing amount questioning the value of a search engine that compromises its organic search results by prioritizing paid listings.
The Search Problem
That's not going to help things with advertisers. I am starting to hear from companies who have until now devoted their search advertising budgets to Baidu that Google (NASDAQ:GOOG) has made huge strides in its search algorithms, and that search ad results on Google were improving quickly. One advertiser I spoke to said that at the end of 2007 Baidu had 100% of their search ad budget. They now have 90%, and that will drop precipitously in 2009.
None of that would be too worrisome if we could believe that Baidu was totally focused on improving its core product. Unfortunately, Baidu has chosen this moment to focus time, attention, and resources on becoming a diversified online conglomerate, venturing into e-commerce, e-payments, and other resource-intensive business in an effort to keep users on its site once they land there.
Leave aside the fact that they are creating enemies where they could be creating partners - or friendly acquisition targets. To diversify into businesses that are so far from your core, that are less brand extensions than leaps into completely new industries, all when you are facing fundamental issues running your core business looks less like wisdom than hubris.
(Unless, of course, this is the first phase of an effort for Baidu to abandon search over the long term. Hmm. But we digress.)
Unless Baidu can demonstrate to advertisers that it is improving its search product faster that Google is, that it continues to deliver better and more meaningful search results, and that the company can do all of this while pursuing credible efforts in online TV, e-commerce, and whatever else it wants to do, the advertising cash from the big spenders is going to start to leak away.
The Communication Problem
What this all comes down to is a failure to communicate.
Whether comfortable admitting it or not, Baidu has always been seen as "Google with Chinese Characteristics." What Baidu needs to recognize is that China's characteristics - and specifically her Internet users - are evolving.
More of the nation's online populace is turning to online search as a pathway to seek truth from facts, not find stealth ads from snake-oil salesmen hidden among - or above - genuinely helpful information. Wall Street may be pushing for monetization, but the demand from Chinese consumers is for credibility, trust, and results they can believe in. Sincere testaments of devotion to such ideals and a few sackings are a good start, but it will not be enough: Baidu has to do more to balance the disparate demands of investors, advertisers, and users.
The history of the Internet is littered with the corpses of great search engines that were popular, then failed, and with dominant players that were challenged by Google and then imploded.
Baidu has had a dominant position in China, but to this observer it is starting to look like all Baidu has is its dominant position. It does not appear credible, it does not appear focused, and it does not look like a particularly good partner for other online companies and a partner of declining value for advertisers.
Yet I give Baidu the benefit of the doubt. I assume it is a good company, just slightly unguided. As such, they need to prove they are on track.
- They need to engage with advertisers and their agencies at every opportunity, both collectively and individually.
- They need to focus on search, and if they want to get into e-commerce, for heaven's sakes go out and buy something, don't try to build it.
- And finally, they need to remember that consumer loyalty in China is ephemeral, and that if they do not engage, their user base can evaporate as quickly as it was built.
I have to believe that this is what their PR agency is telling them. But I also suspect that the lawyers are saying something else.
The lawyers are wrong. This is one of those times when silence is not golden, it is poison.