China's largest search engine provider, Baidu (BIDU), demonstrated in Beijing a soon-to-be released mobile operating system called Baidu Yi and Baidu Easy. Baidu Yi is likely to become a top competitor for companies like Apple (AAPL), Google (GOOG), and RIM (RIMM). As Baidu integrates further into the hearts, minds and smart phones of Chinese consumers, it will become that much more difficult for Google to gain market share once Google decides it is time to re-enter the market.
Baidu Yi appears to have many Android-like features and user experience. Yi will allow third-party apps to be distributed much like Apple's app store. In support of the upcoming Yi OS, Baidu launched a new mobile application platform today. The new platform is not without controversy though, as users will be required to register to use the features. This may cause a loss of users, and the expected impact is not being released. The new homepage will have more links and content, both could impact loading speed and user experience. Baidu currently claims to have approximately 200 million users and about 80% of the search engine market share in China.
The last thing RIM needs right now is one more competitor, and to have the home team produce one is likely to put a final nail in the hopes of China remaining important to RIM for long. With China as the largest single market for mobile, the options for RIM are melting quickly.
Apple products are very popular in China (both the real and the fake), and Apple has announced that China represents about 10% of total revenue for the company. If Baidu Yi can make a significant dent in the growth of iPhone sales in China, Apple may face headwinds on growth for the first time in years. China mobile is the largest mobile phone operator in China as well as the world. China Mobile is a state-owned enterprize and investors should have no question as to what mobile OS will be promoted going forward.
With Google fighting for market share in China with one hand tied behind their back, it would appear Google will now have an uphill battle remaining competitive with the Android OS if Baidu Yi is similar and is able to integrate with the number one search engine in China. Google will likely need to decide if they want to be a major player in this market or walk away from China completely. A half-hearted effort does not appear to be in investors best interests.
Baidu stock has been doing well with investors handsomely rewarded. Baidu is currently not far from the all time high in price put in just two months ago.If Baidu Yi is a success, investors may have one more reason to stay long Baidu and cheer about.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BIDU, GOOG over the next 72 hours.