Baidu's Global Expansion Model Is Going To Fail

| About: Baidu, Inc. (BIDU)


Chinese Internet giant wants to become a global internet player.

Baidu launched new sites in Brazil, Thailand and Egypt as an attempt to accelerate its global expansion that started in Japan six years ago.

Without a change in the user interface and business model, Baidu’s is headed for worldwide failure.

Baidu (NASDAQ:BIDU), which was nicknamed "the Google of China," tries to shake away its reputation as a Chinese-only search engine and accelerates its global expansion. Baidu has been dominating China ever since Google (NASDAQ:GOOG) (NASDAQ:GOOGL) closed its Beijing office and moved to operate solely from Hong Kong. The Chinese Internet giant controls almost 65% of the Chinese search engine market, leaving Qihoo 360 (NYSE:QIHU), Sogou, Google and Soso behind. After winning the search engine market in China, Baidu launched other complementary services such as Baidu Cloud, Baidu Encyclopedia, and Baidu Anti-Virus, etc. to expand its portfolio in the Chinese market beyond the search engine. After Baidu has dominated the Chinese search market and expanded its portfolio to additional services in the Chinese market, the company now wants to expand its search services globally outside of China and become a worldwide player.

Baidu's first move overseas into Japan in 2008 was a complete failure. The Japanese search market was dominated by Yahoo Japan (OTCPK:YAHOF) (OTCPK:YAHOY) and Google when Baidu tried to penetrate it. Yahoo Japan was formed as a joint venture between Yahoo (NASDAQ:YHOO) and Japanese Internet company Softbank (OTCPK:SFTBF) (OTCPK:SFTBY) and offers high-quality content and web portal accustomed to the Japanese market. Baidu Japan offered a simple and clean search for web and images that is very similar to Google search. Five years later, in 2013, Baidu's market share in Japan was minimal as Yahoo held a 53% market share. Google held around a 40% market share, and the other 7% was split between Goo, Bing, Baidu, and some other local search engines. Baidu did not offer any added value to the Japanese market compared to the existing players and, as a result, was not able to gain any substantial market share there.

With the Japanese failure in mind, Baidu launched its second overseas site last week, this time in Portuguese for the Brazilian market. Unlike the Japanese market that was dominated by two large corporations, the Brazilian market is dominated only by Google, which holds a 98% market share with almost no real competition in sight. In Brazil, Baidu offers not only simple and clean search but also image search, video search, and Postbar. Baidu's social effort, Postbar, is an online community available in Brazil, Thailand, and Vietnam where users can share posts in various forums according to a particular subject. The Brazilian social media market is in the middle of a clash between Google and Facebook (NASDAQ:FB) over the lead in the emerging country as described in an earlier article. Baidu Postbar might be successful in China, but it offers a limited functionality that cannot compete with Google Plus, Facebook, or Twitter (NYSE:TWTR) in Brazil.

As part of its global expansion, Baidu also launched a beta version in Thailand and Egypt. Baidu's user interface in these beta versions looks very similar to the interface in Brazil. It seems that Baidu uses one interface for all of its global sites similar to the way Google used when it expanded globally. However, Google expanded globally in an era where its user interface was unique and innovative, and Internet users looked for a simple and clean search engine among all the other web portals. Baidu is not Google, and its brand is not as strong globally as Google. In order to succeed, Baidu will have to provide users with added value compared to Google.

Baidu signals it enters the Brazilian market for the long run and opens a development center in the country. If Baidu uses a local office in Brazil to understand the local market and adjust their Portuguese site to the needs and requirements of Brazilian market, it has a chance to steal a few market share percent points from Google. Another way Baidu goes is to team up with a local Internet company or mass media company in Brazil to offer a customized version to the Brazilian market similar to the model Yahoo used in Japan. Without such collaboration, Baidu Brazil is headed to fail.


Baidu, the Chinese Internet giant that dominates the Chinese market, makes another attempt to expand globally. Its first attempt to open a Japanese site has failed, and its second attempt is in Brazil. Brazil's search market is dominated solely by Google, and Baidu's offering to the Brazilian market does not bring any added value to the Internet users there. Brazil already has one Google, and it does not need another Google look-alike. Baidu can succeed in Brazil if it offers something extra to its Brazilian customers. This extra something could come from a collaboration with a local partner in the same model Yahoo Japan operates. Otherwise, it would be very difficult for Baidu to penetrate the Brazilian market and gain some market share on Google's expense.

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