The Wall Street Journal
Baidu founder and CEO Robin Li at the company's Beijing headquarters.
BEIJING—Chinese Internet search giant Baidu Inc. is gearing for a battle on rival Google Inc.'s own turf: Phones that use Google's Android operating system.
The Beijing-based company is in talks with mobile handset makers that use the Android software about embedding a Baidu search box on their phones that are destined for the Chinese market, the company's Chief Executive Robin Li said in an interview.
Targeting Android phones deepens Baidu's competition with Google in China, as both companies look to expand in the small but fast-growing mobile search market there. Android phones made up a tiny 0.4% of the 7.25 million smartphones sold in China during the last three months of 2009, according to Beijing-based technology research firm Analysys International. Still, Baidu wants to capture as much of this budding market as early as possible.
The company is in similar talks with makers of other mobile operating systems and handsets that run their software, Mr. Li said. Baidu's goal: To have "a search box very prominently on the phone's screen." Though he declined to name any companies, he said, "We are talking to quite a few big names."
Last month, the Symbian Foundation, which manages the Symbian operating system heavily used on phones made by Nokia Corp., announced it would set up a joint lab along with Baidu to help integrate Baidu search functions onto Symbian. According to Analysys, Symbian-powered phones made up 72.1% of the smartphones sold in China during the fourth quarter of last year.
Mr. Li also said in the interview the U.S.-traded company is considering a mainland Chinese listing even as it considers acquisitions outside its home market. But he offered few details about either push.
Though virtually unknown outside of its home country, Baidu is the overwhelmingly dominant search engine in China and the company further strengthened its leading position over Google in China after Google shut down its China search service in March and began directing Chinese search users to its Hong Kong site. Baidu's share of China's search market grew six percentage points in the second quarter to 70%, according to Analysys. Google's share fell by about the same amount to 24%.
Mr. Li said Thursday in an earnings conference call that mobile search accounts for just a small percentage of Baidu's traffic, but the company has seen "effective growth" in mobile search traffic in the last few years.
A Google spokeswoman declined to comment.
Nasdaq-listed Baidu is also in contact with regulators about listing on a mainland Chinese stock market, but has no definite schedule for a listing, Mr. Li said.
"The technicalities haven't been thought through carefully yet. But the general direction is that…we would like to get listed," partly because most of Baidu's traffic and revenue comes from China, he said.
A listing in China would give Asian investors more access to the company's stock and bring in funds that could fuel expansion by Baidu, whose only overseas search site so far is in Japan.
The timeline for the Chinese listing depends on the company's need for additional capital, market momentum and China's regulatory environment. Me. Li added it is too early too say how much Baidu would aim to raise in a listing or what it would do with the funds.
He also added Baidu would consider acquiring Internet sector companies outside China, declining to give details.
"We'll be open-minded. I think there are quite a few interesting companies outside of China," Mr. Li said.
Web search will remain Baidu's core revenue growth driver for the next five to 15 years, but other content pages and international search operations could become big parts of Baidu's business in several years as well, Mr. Li said.
"Right now, our focus is still on search and I think that there are many years down the road that we will enjoy very high growth."
"Once we decide to launch new services in other countries we will launch multiple languages, not just one," he said.
Baidu is evaluating which countries or regions to focus on for expansion abroad, but it will likely avoid the U.S. "for the time being" since the market already has strong search players, he said.
Though Baidu said its current international revenue is negligible, Mr. Li hopes that will change in the future.
"Maybe five to 10 years down the road, the international revenue will also become a very significant part of our business."
