Search site moves at the speed of China
Diners often plunge their chopsticks into shared entrees at even the most upscale restaurants here. This mouth-to-plate maneuver might be considered a faux pas in the germ-phobic West, akin to George double-dipping a chip in “Seinfeld.”
But appreciating such cultural differences is what Baidu.com Inc.'s chief financial officer, Shawn Wang, says gives the Chinese search giant unique insight into the country’s 1.3 billion people as it competes with American rivals such as Google Inc. and Yahoo Inc.
That knowledge informs innovations large and small, such as Baidu’s bowing to local preference in popping up a new browser window when users click on search results. It can also produce features, such as its MP3 search for digital music downloads, that infuriate the entertainment industry.
“It’s just different people, different culture, different behavior,” Wang said. “These are things that connect people together in a way people in the West couldn’t imagine.”
On Tuesday, Baidu became the first Chinese company to join the Nasdaq 100 index, placing it among the world’s most valuable technology companies.
Founded in 2000, it boasts a stock market capitalization of $13.3 billion and conducts more than 60% of search queries in China, the world’s fastest-growing major Internet market.
Baidu’s success mirrors the ferocious growth of China’s technology industry, which is led by scrappy innovators who are used to fighting for loyalty on the Web like the street-corner barkers they grew up around.
Consider Baidu founder Robin Li, 39. He was born in an impoverished region 200 miles southwest of Beijing and endured the privations of the Cultural Revolution. He was a sophomore at Beijing University during the Tiananmen Square crackdown of 1989.
He has been quoted as saying that the experience prompted him to leave China after graduating, although now he says he was merely following the crowd.
“At that time China was still pretty much a planned economy,” Li said. “There was not much opportunity for us to do anything with big impact.”
Li traveled to the United States, earned a master’s degree in computer science at the State University of New York at Buffalo, and made his way to Silicon Valley in 1997. He worked on search engines at Infoseek Corp. for two years before returning home.
“The U.S. market was already crowded and China was taking off,” Li said. “When I came back to China, there were only 8 million Internet users. Today, we have over 160 million users. It was good timing for me to start something in China.”
His audacious dream took wing. The company’s third-quarter revenue and profit more than doubled over the same period last year, to $66.3 million and $24.2 million, respectively.
Chinese Internet users say they prefer Baidu’s search results over Google’s. Baidu plays up the East versus West theme in its advertising with slogans such as “We know Chinese best.” Google, which captured the U.S. market through sheer technical superiority, has never needed to advertise to woo users.
Perception isn’t necessarily reality. One recent study, by search engine marketing firm Enquiro Search Solutions Inc., discovered that Chinese-speaking searchers on average took half the time to find what they were looking for through Google -- 30 seconds versus 55 seconds through Baidu.
Still, Baidu is trouncing its American competitors here with 74% of search queries compared with 18% for Google, according to the latest data from IResearch Consulting Group in Beijing.
“We’re pleased with our progress in China, and we’re committed to developing innovative products to best meet the needs of our local users,” a Google spokeswoman said in an e-mailed statement.
Yahoo, which in 2005 effectively paid $1 billion for Alibaba.com to take over its Chinese operations in exchange for an equity stake in the booming Chinese company, controls 3% of the market.
It’s difficult to assess the effects of the Chinese government’s Internet censorship. Baidu follows the rules, without drawing attention to what’s omitted, while competitor Google publicly shows its disdain whenever searchers look for a verboten term, such as Falun Gong, the name of an outlawed spiritual group.
Included within the results is a disclaimer that states, “Because of local rules and policies, some results weren’t displayed.”
“The Chinese people were quite indignant,” said a digital analyst who spoke on condition of anonymity. “That’s like coming here and saying, ‘I’m in your house, I’ll eat your food, but let me tell you upfront that I don’t particularly like it.’ ”
Li said Baidu simply does a better job of figuring out what its users want in a country where Forrester Research estimates that 38% of Internet users are members of Generation Y: 18- to 27-year-olds looking to be entertained.
For example, Baidu serves up top-10 lists that rank, among other things, China’s favorite sodas. It created a whimsical question-and-answer forum called Baidu Knows, in which the online community has responded to 20 million questions -- some weighty, some trivial.
One of its most popular features, Post Bar, points Web searchers to online discussion forums devoted to particular topics, be it dating, family, celebrity gossip or astrology. It has become a barometer of the Chinese zeitgeist, forecasting the 2005 winner of “Super Girl,” the country’s version of “American Idol.”
“For one of the super girls, we had more than 10 million posts over the course of a month,” Li said. “Even before the voting results came out, we actually already knew who was going to win.”
Baidu’s quest to give users what they want sometimes lands it in hot water.
Its search engine points users to pirated songs that can be downloaded free. Researchers believe this feature alone generates huge traffic, although Baidu declines to provide statistics.
“Baidu is like Napster at its height, combined with Google,” Enquiro Chief Executive Gord Hotchkiss said.
The search engine for unauthorized copies of songs predictably incurred the wrath of the entertainment industry. Seven music companies -- including giants EMI Music, Sony BMG Music Entertainment Inc., Warner Music Group and Universal Music Group -- sued Baidu in September 2005, accusing it of enabling piracy.
But unlike their counterparts in the United States, Chinese courts rebuffed the recording industry. A Beijing court last year ruled in Baidu’s favor, finding that the search engine wasn’t liable for pirated music downloads offered by third-party sites. The case is under appeal.
CFO Wang seemed emboldened, not chastened, by the court battle. Baidu unveiled a video search engine in February that attracts about 3 million daily users trolling for movie and television downloads and adult content.
“Downloading is part of the culture,” Wang said. “The reality is there’s no way you can stop that. Not in China. Not anywhere in the world. This is reality. I think the record companies are coming to recognize that: Don’t fight technology; use technology.”
Analysts say the secret to Baidu’s success is the speed at which it adapts to the Chinese market. Here, people use the phrase “China time” to describe the breathless pace of change, similar to how “Internet time” entered the English lexicon during the dot-com boom.
Baidu’s rivals from Silicon Valley, which only a decade ago were themselves fleet-footed start-ups, proceed more cautiously in China.
Many U.S.-based technology companies are encumbered by layers of management, protracted decision-making and the need to phone home before introducing products. Worse, they generally wait to launch products in the United States before China, said Paul Denlinger, an independent consultant in Beijing who has worked with Chinese Internet firms.
In such a fast-moving place, that’s a killer.
“You need to operate with what I call a ‘Ready, shoot, aim’ mentality,” said T.R. Harrington, chief executive of search engine consultant Darwin Marketing in Shanghai. “You can have great aim, but by the time you’re ready to shoot, the target’s gone.”
It’s already the Wild Wild East, and only 12% of the Chinese population is online. It’s bound to get more frenzied with millions of Chinese becoming Internet users each month.
In anticipation of continued growth, Baidu is spending as much as $70 million on a new headquarters to house its more than 5,000 employees. The building is going up in a wooded area that’s visible from the 12th-floor window of Baidu’s current offices in the Ideal International Plaza skyscraper.
“Our people are scattered around three, four different buildings in the neighborhood. We’ve outgrown ourselves,” Wang said. “We need a home where we can all sit together.”
Begin text of infobox
Business: Internet search engine
Chief executive: Robin Li
Employees: More than 5,000
Market value: $13.3 billion
Meaning of Baidu: “Hundreds of times”
Source: Times research