Baidu Fires 4 Employees for Deleting Content in Exchange for Money

Story first reported from foxbusiness.com

Baidu Inc. (BIDU) said on Monday it has fired four employees suspected of having taken payments to delete posts from its website.

Baidu spokeswoman Betty Tian confirmed in an email to Dow Jones Newswires on Monday that three employees had been arrested by the police due to the large amounts of money that had been transferred in exchange for the deletions. She didn't elaborate on why only three of the employees had been arrested.

The emailed statement follows local media reports that Baidu has fired several employees over payments in return for deleting content.

"Baidu has always firmly cracked down on the illegal behavior of online posts deletion for payment," the Ms. Tian wrote in an email.

Baidu said that illegal deletion of online posts remains a major problem in China, and that it would proactively report illegal activity to the authorities. It is common for individuals or companies to pay money to have controversial or negative posts deleted from websites and blogs, according to Chinese media reports.

Baidu said that it maintains a record of original posts and of deletions made by employees, and verifies the records later.

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Baidu's CEO Pursues Growth Overseas

The Wall Street Journal

Google Inc.'s pullback in China earlier this year left homegrown giant Baidu Inc. more dominant than ever as China's biggest search engine.

Now, Robin Li, Baidu's chief executive, must figure out new ways to grow amid immense investor expectations.

Mr. Li, a soft-spoken 41-year-old engineer who co-founded Baidu in 2000 after a stint in Silicon Valley, dismisses concerns that growth in Baidu's core China search business will dry up anytime soon. With more than two-thirds of China's population not yet Internet users, Mr. Li says search advertising will remain Baidu's main growth driver for five to 15 years.

But he is looking to develop other revenue streams, including overseas and from ads on content pages created by Baidu or partners. He would also consider buying foreign Internet companies.

Baidu has played down its benefit from Google's moving its China search service to Hong Kong, but Baidu's share of revenue in China's search-advertising market grew six percentage points in the second quarter to 70%, according to Beijing-based research firm Analysys International. Google's share fell by about the same amount—to 24%.

Mr. Li shared his strategy at Baidu's Beijing headquarters.

Excerpts:

WSJ: How would you describe China's search market right now?

Mr. Li: The search [advertising] market in China is still relatively small—smaller than the U.S., smaller than Japan, smaller than the U.K., but it is growing very fast.

WSJ: How did Google moving its China search service to Hong Kong in March open up new opportunities in China's search market?

Mr. Li: [By drawing attention to the search business] it helped educate the advertisers that search is one of the best ways for them to reach their targeted consumers. So in this sense I think it did benefit us a little bit, but because we already have such a large share, it's not obvious how much traffic we gained over this.

WSJ: Beyond search, what will be your middle- and long-term revenue drivers?

Mr. Li: The search market is in its early stage. We would be able to enjoy many years of high growth for our core search business.

And secondly, I think there are two types of growth drivers in the mid to long term. The first one is what we call the landing-page opportunity. We started to build our own content and integrate those kinds of content on our search result pages. Those kinds of content pages, we call it a landing page. We can also place sponsored links on the landing page.

One example is the Qiyi venture, [an online video-streaming site]. When people search this type of content on Baidu, we can direct users to Qiyi. And Qiyi itself can show advertising there, and make money.

There are many examples in other sectors that we would like to do going forward. So I think five years down the road, we should have a meaningful portion of our revenue from the landing-page strategy.

And the third [future revenue driver] is, of course, international Baidu seo.

WSJ: What are your plans for international expansion?

Mr. Li: We already started our international expansion. We launched our Japanese search [site] a couple years ago. But we realize that international expansion is a long-term investment.

I think that five to 10 years down the road we'll have a very meaningful part of our revenue come from international expansion. Right now, we only have one other language, which is Japanese, but moving forward we would launch a lot more other languages.

WSJ: Any plans to expand to the U.S.?

Mr. Li: In the U.S. you already have very strong search-engine players—Google, Microsoft, etc. I think we would be cautious entering that market. So for our international expansion we will probably avoid the U.S. for the time being.

WSJ: How do China's censorship regulations affect Baidu operations?

Mr. Li: We are used to it. We are based in China. We obviously need to abide by the Chinese law. What we found out is that our users are not very interested in those [censored terms]. They look for entertainment-oriented information, they look for business-oriented information, lifestyle, all kinds of things.

WSJ: Does it raise costs for Baidu?

Mr. Li: It does. It's a fairly comprehensive system that we need to ensure that we take necessary steps against some illegal content.

WSJ: Are you looking at M&A or investment opportunities overseas?

Mr. Li: We'll be open-minded. I think there are quite a few interesting companies outside of China. They provide good, innovative services. They're doing well, they're making money, but they're not in China. By partnering with those kinds of companies we can help promote and expand their businesses in China.

WSJ: So you're looking for partnerships rather than acquisitions?

Mr. Li: Not necessarily. Anything's possible. We'll deal with this on a case-by-case basis.

WSJ: Are you concerned that growth might not keep up with investor expectations?

Mr. Li: I'm not concerned. I don't run the company based on investor expectations. I run the company based on our own vision of the future of Internet computing and the future of the Chinese market.

I'm the founder of the company. I will stay here for a very long time. I don't need to please those short-term investors for next quarter. I need to make sure the company is healthy and strong and will continue to grow for many, many years.

Baidu Seeks Android Deal, China Listing

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."

Media Skews Google-Beijing Debacle: China Watcher

CNBC

Reports that Google's site in China was again blocked late last week highlights how the media narrative on China "is sometimes skewed", Shaun Rein, managing director at China Market Research Group told CNBC."A lot of people criticize China's government for doing things that they're not actually doing," said Rein, and cautioned investors to "dig in deep" to "really understand what's happening in the China market."

Google caused confusion last week when it announced that its China page had been blocked by Beijing, only to admit several hours later that the inability to access the website was likely a technical glitch.

The news is the latest development in the dispute between Google and China, which started earlier this year when Google threatened to pull its operations from the mainland, after the firm took issue with Beijing's censorship of its search engine as well as cyber-terrorism it alleged was raged by Chinese government hackers. But the standoff appeared to have cooled somewhat, when China renewed Google's license in last month, after the internet giant agreed to make some changes to its Chinese website.

While the media should take some of the blame for last week's incident, Rein said, he added that China needs to get better at managing its soft power.

"They do things sometimes that confuses the rest of the world and i think that the government needs to continue to reform, make sure that they bounce internal security issues, with external soft power, because running into problems like Google is something that's only going to make China look bad."

Baidu Profit Surges as China Dispute Hampers Google

Bloomberg

 

Baidu Inc., operator of China’s most popular online search engine, reported second-quarter profit that beat analysts’ estimates as a censorship dispute with Chinese regulators hampered main rival Google Inc.

Net income for the three months ended June more than doubled to 837.4 million yuan ($123.6 million), or 2.40 yuan per American depositary receipt, Baidu said today in a statement. That exceeded the 710.4 million yuan average of 14 analysts’ estimates compiled by Bloomberg. In the year-earlier period, Baidu’s profit was 383.3 million yuan, or 1.10 yuan per ADR.

Baidu gained advertisers from Google after the U.S. company shut its China-based search site in March and redirected local users offshore to avoid censorship rules in the world’s biggest online market. The Beijing-based company’s stock has climbed 78 percent in U.S. trading this year, making it the best performer in the Morgan Stanley Internet Index.

“We believe the market-share gain for Baidu versus the market-share loss for Google is likely related to Google China’s partial exit,” Citigroup Inc. analyst Alicia Yap wrote in a July 19 report. The changes in Google’s China site “caused increasingly bad user experiences,” according to Yap.

Outperforming Rivals

Baidu’s ADRs fell less than 1 percent in Nasdaq Stock Market trading today before the earnings announcement. The stock has outperformed online rivals in China this year including Tencent Holdings Ltd., the country’s biggest Internet company by market value, and Alibaba.com Ltd., the leading local e-commerce operator.

Sales during the three-month period were 1.9 billion yuan, compared with 1.1 billion yuan a year earlier. Revenue is expected to rise to as much as 2.26 billion yuan in the third quarter, Baidu said. This compares with the 2.18 billion yuan average of analysts’ estimates compiled by Bloomberg.

The adoption of Baidu’s Phoenix Nest advertising system also boosted the company’s sales, according to Citigroup’s Yap. In December, Baidu introduced the program, which is designed to facilitate the sales of online-search keywords to clients.

Baidu accounted for 70.8 percent of China’s search-engine market by revenue in the second-quarter, rising from 67.8 percent three months earlier, according to research company iResearch. Google’s market share dropped to 27.3 percent from 29.5 percent.

In March, Google defied the Chinese government by ending self-censorship of its local search service and redirecting users to an unfiltered Hong Kong site. The U.S. company won the renewal of its Internet license in China this month after submitting a revised application on the grounds that it would now point users to the Hong Kong site, instead of redirecting them automatically.

China had an estimated 420 million Internet users at the end of June, an increase of 36 million from six months earlier, according to data from the government-sponsored China Internet Network Information Center.

Many Wired Chinese Unfazed by Possible Google Exit

AP

 

BEIJING (AP) - A world without Google? They can imagine it just fine in China. After all, it's not like losing "World of Warcraft."

The online giant's threat to pull out of China over censorship has drawn little reaction among the country's 384 million Internet users. No flood of complaints to China's consumer rights agency, like the tens of thousands received in one day when the online fantasy game "World of Warcraft" was yanked last year because of a bureaucratic turf battle. Nor has there been the type of fury that saw 32,000 indignant gamers participate in an online chat session on the "World of Warcraft."

"If Google leaves China, we'll lose one search engine. But we still have other choices," said 28-year-old Deng Zhiluo, who works in marketing in Beijing. He said while Google's search results are more "international," most of what he wants can be found on Chinese competitor Baidu. "For locals, Baidu is enough."

The indifference of many Chinese points to a telling challenge for Google in the world's most populous Internet market. The Chinese Internet world is youthful, with people under 30 making up 61.5 percent of the online population, and Google's cause isn't generating popular support among China's wired teens and 20-somethings.

"It's like in the U.S. saying, 'You can't use Yahoo search anymore'," said T.R. Harrington, CEO of Shanghai-based Darwin Marketing, which specializes in China's search engines. "What would people say? 'So what? I'll use Google more, and I'll try Bing and I might try a few other ones ... I don't care.'"

Google threatened three weeks ago to shut down its Chinese search engine, Google.cn, citing cyberattacks emanating from China plus attempts to snoop on dissidents.

Some Chinese admire the Mountain View, Calif.-based company's stand and its "don't be evil" image: A few dozen laid flowers outside Google's Beijing headquarters, and a few hundred joined a "Don't Go Google" Web site before it was shut down for unknown reasons.

The trouble Google is having generating support among Chinese underscores how successfully the communist government controls information. While authorities have set up an extensive network of Internet filters, blockades and monitoring - dubbed the "Great Firewall of China" - that's only part of the picture. China's permissible Internet universe is flooded with choice, with 3.2 million registered Web sites offering politically acceptable news coverage and loads of diversions from shopping to music downloads.

The generation of Chinese currently in their teens and 20s are known for their love of consumerism and disdain for politics. Most aren't interested in scaling the "Great Firewall" by using proxy servers or other technical subterfuges, according to Kaiser Kuo, a Beijing-based technology analyst. Their favorite online activities: listening to music, chatting with friends and playing video games.

For many sites blocked by the government - including Facebook, YouTube and Twitter - there are readily available, government-approved Chinese substitutes: Youku and Tudou for videos, Kaixinwang and Renren for social networking. Sina.com, the largest Internet portal, runs a Twitter-like microblogging site.

"Baidu does the same things as Google," said 30-year-old IT salesman Zheng Hongyi. "And if it leaves there will be more companies coming up to fill this need."

Beijing may be interested in seeking an accommodation. Google is an innovator whose presence could spur innovation by Chinese competitors. Blocking Google sites could encourage more Chinese to seek ways of getting around Internet controls. That's what happened last year when two government agencies prohibited Chinese sites from offering "World of Warcraft" while they battled over the right to regulate the lucrative online game. Local stores started selling access cards that allowed Chinese fans to play the game on Taiwanese servers.

Google's message is resonating with some Chinese. Wen Yunchao, a popular blogger who writes about social issues and the Internet, said the publicity Google touched off has raised awareness about censorship and Internet access, especially in less worldly cities.

"A lot of people might not normally feel the existence of censorship. This lets more people know, understand and like Google. I've heard in some second and third-tier cities, Google's usage is increasing dramatically," Wen said.

Outside big cities like Beijing and Shanghai, Google's brand recognition is low, said Tangos Chan of Internet and technology blog China Web Radar. When visiting his rural hometown in southeastern Fujian province a year or so ago, Chan found that some of his childhood friends "didn't really know what it was ... they just use Baidu."

While Google is generally seen in China as the go-to site for searching overseas Web sites, Baidu is known for being better at finding Web sites in Chinese, both in China and abroad. The Nasdaq-listed company also runs a popular message board, online encyclopedia and vast digital music library.

Baidu has about 60 percent of China's search engine market, compared with Google's 35 percent, according to Analysys International, a Beijing research firm.

"Baidu has more products that make it a destination for the average user in China," said Harrington, the marketing specialist.

Also hurting Google is the Chinese government's control of the country's news media. State-run media have glossed over the company's allegations about China-based hacking attacks and instead portrayed the affair as a business decision by Google. Many young Chinese believe that Google wants to leave because it's being drubbed by Baidu.

State media recently hardened their stance, accusing the U.S. government of being behind the dispute, particularly after a speech by U.S. Secretary of State Hillary Rodham Clinton on Jan. 21 when she called on China to investigate the attacks that led to Google's threat to pull out.

"Right now, a lot of netizens feel the American government was involved. Google's image is becoming more and more negative," said Rao Jin, an online entrepreneur who recently launched google-liar.com. "If Google leaves, we will be losing an Internet tool but we must be aware of national security threats."

Rao has been successful in tapping popular sentiment in China. He is the founder of anti-cnn.com, launched during ethnic rioting in Tibet in March 2008 and aimed at exposing alleged bias in Western media reports. It still receives 1 million page views a day.

The 25-year-old has such influence that he was among bloggers and other Chinese Internet personalities invited to round-table discussions at the U.S. Embassy in Beijing before President Barack Obama's visit in November and after Clinton's speech, in an effort by the State Department to sway Chinese public opinion.

Ironically, some of the anti-Google articles Rao posted on google-liar.com were found with the help of Google. The Internet entrepreneur and his friends even use the company's Gmail e-mail service.

Rao said he's backing up his Gmail account and preparing to switch to a Chinese e-mail provider. He said you can always find a ready Chinese substitute.

Baidu Anticipates Life After Google

Washington Post

BEIJING -- In 2000, a 31-year-old software engineer named Li Yanhong, a.k.a. Robin Li, left his job in Silicon Valley and returned home to China to start an Internet search engine. He raised $26.2 million in venture capital, including a modest investment by Google.

Ten years later, Li's company, Baidu, has become the dominant search engine in China, a goliath with 7,000 employees and a market value of $16.2 billion on the Nasdaq Stock Market. Google, which sold its stake in 2006 when it launched its own Chinese site, has lagged far behind, capturing less than half of the market share Baidu has here.

In a country obsessed with economic advancement, Li, a graduate of Beijing University and SUNY at Buffalo, has attained what Chinese newspapers have called pop-star status, with fans thronging Baidu conferences. And to many here, his company's success has become a point of national pride, even though its initial investors were virtually all American.

Now investors are betting that Baidu will reap the benefits if Google ends up exiting China over its dispute with the government about alleged cyberattacks on Google e-mail and source code. Since Tuesday, when Google announced that it would stop censoring its search engine even if that meant losing its Chinese business license, Baidu's stock on the Nasdaq has surged 21 percent to a new high, adding $2.8 billion to the company's market value in just three days.

Although investors are happy, China watchers are worried about the political consequences of Chinese Internet users depending too heavily on Baidu for news and information.

The company has been accused of altering search results for advertisers, by either deleting content or pushing firms' sites higher up on the search result lists in return for payments. The charge has prompted the company to launch an overhaul of its listings.

Moreover, as a Chinese company, Baidu has little choice but to comply with government demands for censorship. An industry source familiar with the firm said officials from the Ministry of Industries and Information Technology are stationed at its offices.

The company does not pretend to have a mission, as Google does: "Don't be evil."

"Baidu does face the same censorship issues, but without the corporate culture that resents censorship," said Jeremy Goldkorn, founder of a blog called Danwei.org and an online media expert in Beijing.

In an item he posted last week on his blog, Baidu's chief product designer, Sun Yunfeng, said that in China, "every enterprise or every individual must dance with shackles."

"This is the reality," Sun wrote. "Do as much as you can is the real attitude to have as a business or a person." The posting was later taken down from his blog, but reprinted on other sites.

"Whether it's Baidu or Chinese versions of YouTube or Sina or Sohu, Chinese Internet sites are getting daily directives from the government telling them what kinds of content they cannot allow on their site and what they need to delete," said Rebecca MacKinnon, an Open Society fellow and co-founder of GlobalVoicesOnline.org, a network of bloggers and online activists.

MacKinnon said she has compared search results on Google's China search engine and Baidu over the past four years and that "consistently, Baidu has censored politically sensitive search results much more thoroughly than Google.cn." She added, "There are a number of very sensitive terms that get no results from Baidu. On google.cn, you get sanitized results but at least you get results."

Meeting Chinese needs

Baidu owes much of its success to the vision and drive of its founder. Li, who declined to be interviewed for this article, tailored Baidu to what he believed were the needs and tastes of the Chinese. He made the search engine box longer and wider for Chinese characters. He introduced a feature that people with interests in, say, basketball could use to find other people with similar interests and exchange views.

More important, Baidu also linked to sites where people could download free music MP3s, largely pirated. That accounted for much of Baidu's traffic in its early years and about 20 percent of it as late as 2005, according to an industry source familiar with the company. Today, Baidu has captured two-thirds of the Chinese market.

Although the company said it couldn't possibly monitor the multitude of sites run by third parties, critics say it turned a blind eye to the legal issues. The People's High Court of Beijing has twice ruled in Baidu's favor in copyright infringement suits brought by record companies. Today, music downloads account for well under 10 percent of Baidu's traffic, the industry source said.

More recently, Baidu has introduced a Wiki-style service called "Baidu Zhidao" or Baidu Knows, where people can plug in questions and get replies. It has also courted beginners on the Web, a large category given that the number of Chinese Internet users -- 338 million at last count in the middle of last year -- is growing about 30 to 40 percent a year.

Success despite setbacks

In a business dominated by U.S. giants such as Google, Yahoo and Microsoft, Baidu has played to national pride. The name Baidu (by-DOO) means "100 degrees" but was inspired by a Song Dynasty love poem in which it means 100 times. A man is searching for his true love during the traditional Lantern Day Festival. "A hundred times I search for her in the crowd and turn around just to discover she is there where the lantern lights are dim," the man writes.

The firm has "managed to convince a lot of people that, as a Chinese company, they have a grip on the subtleties of the Chinese language," said Kaiser Kuo, an Internet consultant and musician. In one ad, Baidu featured a bumbling, inarticulate foreigner in Chinese garb meeting a clever Chinese character who talks circles around the befuddled foreigner.

Baidu has its critics. Many of them think that the company's ardor for money prompted it to accept payments in return for deleting negative reports. When the Sanlu Group was found to have sold dairy products containing kidney-damaging melamine, critics alleged that Baidu had agreed to filter out relevant pages from its search results, citing a document purporting to describe an agreement between Sanlu and Baidu. Baidu denied the accusations, but the incident damaged the company's reputation and for a time drove traffic to other sites, according to one competitor.

There have been other controversies as well. In November 2008, China Central Television said Baidu's paid search service, which let Web sites pay to be listed higher among search results, highlighted links to unlicensed companies that offered medical products or services. CCTV said the sites sold treatments -- many of them fake, useless or unlicensed -- for cancer, sexually transmitted diseases and other ailments. CCTV also said that consumers were more likely to purchase such products because it wasn't clear that the product placement had been purchased.

Despite such setbacks, Baidu continues to make gains. It earned $72.2 million in the third quarter last year. Big advertisers include Nike, Intel and other Fortune 500 companies.

It's a reminder that Baidu's mission isn't political or philanthropic: It's a business.

"For ordinary people, the critical information is not keyhole reports of Zhongnanhai," said Baidu's chief product designer Sun, in his blog post last week, referring to the compound where China's top leaders live, "but the most routine information in economy, culture and technology fields."

As with the rest of his posting, this observation was also deleted from his blog, but it was reprinted elsewhere.

Why Google Is Quitting China

Forbes 

It's not censorship. The search giant just couldn't compete with Baidu.

It's easy to give up if you've already lost the battle. And Google is doing just that in China. Eric Schmidt's move to quit offering a censored Google.cn search engine to the Chinese market has been read by idealists as the right thing to do. But it is first a business decision.

Even though Google's ( GOOG - news - people ) market share climbed from 15% in mid-2006 to 31% today, the company had hoped for a bigger share by now. Kai-Fu Lee, Google China's former president, told me in 2006 that Google not only wanted to have a competitive product to Baidu's, the local search leader, but a superior product. This didn't happen: Baidu has only increased its market share, going from 47% in mid-2006 to 64% today. That's a big lead.

Baidu, started by China-born entrepreneur Robin Li in late 1999 just as Larry Page and Sergey Brin were cranking up Google in Silicon Valley, understands the local Chinese market better than Google's Mountain View team.

Google fumbled with an initially inferior Chinese search engine launched in 2000, while Baidu grabbed the lead in China--and kept it--with several innovative search features customized for local tastes. Baidu introduced community-oriented services that appealed to Chinese Internet users, including bulletin boards where leads on information could be exchanged--a service that Google China's former president Kai-Fu Lee dismissed as having nothing to do with search. Baidu also offered instant messaging, a hit with China's Netizens.

Plus, Baidu was first to the market with mobile search and information offered up in multimedia, including video clips. Baidu also set up a national network of advertising resellers in 200 Chinese cities to educate businesses about the power of online advertising--a step that Google did not take.

Baidu's search feature for music also proved highly popular. Google, realizing the potentially illegal nature of the free music downloads, opted to provide links to music stores instead. Baidu later began collaborating with music labels on authorized downloads.

One other key factor put Baidu in the lead: Its search technology was considered superior to Google seo in the Mandarin language. Scrambling to catch up, in 2005 Google hired the experienced Lee as its president from Microsoft  ( MSFT -  news  -  people ). Then in 2006 Google launched its first Chinese-language search engine run from China, Google.cn. With Lee at the helm, Google recruited dozens of top engineers and linguists to its Beijing headquarters to perfect search results on Google.cn. Working at the towering headquarters of Google China at Zhongguancun Software Park in northeastern Beijing, some 100 engineers wrote codes to deal with inputting Pinyin or Roman letters to signify Mandarin sounds and such intricate tasks as delineating words in Chinese characteristics that don't clearly define white spaces.

The efforts paid off with speedier and more precise search results as well as more reliable service. But no matter the global brand name, the maximized effort and the financial resources, Google's Chinese search engine couldn't trump Baidu.

Perhaps Google should have turned over its business to local rival Baidu and let Baidu run with it. There is a precedent. Back in 2005 Jerry Yang turned over the management reins for Yahoo! ( YHOO - news - people) in China to Jack Ma, the charismatic leader of China's e-commerce powerhouse Alibaba. Yang knew that Ma, thinking local, acting local, would have a better shot at getting the right formula for China.

Granted this is still a work in progress as Yahoo! refines its features for the Chinese market. But as Zeng Ming, former president of Yahoo! China, told me, "The net is about culture. You can't have expats running it."

Indeed, why give up now--unless you realize there's no way you're ever going to win the race. After all, Page and Brin had already crossed the line back in 2006 by agreeing to have their new Google.cn, run from China, subject to censorship. They didn't have much choice. All companies doing business in China follow the same Chinese government rules. Yes, Baidu's search results are also censored.

It wasn't all that long ago--2004--that it looked like Google might use Baidu as its entry route. Google invested $5 million in Baidu for a 2.6% stake but shifted strategy in mid-2006 by selling those shares for more than $60 million and rolling out Google.cn the same year. In hindsight, and given its bumpy history in China and this latest jockeying with the Chinese government, maybe Google should have pursued the go-with-Baidu strategy.

If Google exits the $300 million Chinese search market now, it's giving Baidu runway to be a monopoly. And if that happens, Baidu has a shot at becoming the world's dominant search company (it's already entered Japan) by sheer arithmetic alone.

By serving China's nearly 300 million Internet users and 670 million mobile phone users--both the world's largest markets--Baidu may someday be bigger than Google globally, something Robin Li once told me he has no doubts will happen.

Rebecca A. Fannin is an internationally recognized author and journalist who has been writing about entrepreneurship and innovation for nearly 20 years. Her book, Silicon Dragon, was published by McGraw-Hill in 2008 and translated into several languages. During the height of the dot-com boom from 1999-2001, she was international news editor at Red Herring, later joining the Asian Venture Capital Journal as international editor and writing for several leading business publications, including Inc., The Deal, Worth, CEO and Fast Company. She also authored "A New Dawn" for KPMG in 2009. Fannin has lectured at several universities in Asia and the U.S., and has made numerous public speaking appearances worldwide.

Chinese Adept At Internet Adaptation

Wall Street Journal

BEIJING—Baidu Inc., owner of the most popular Web site in China, isn't known for ground-breaking innovation. From the Google-esque look of Baidu.com's main page to its Wikipedia-like encyclopedia to a question-and-answer service that's similar to Yahoo Answers, the Chinese Internet search company has long been tarred by critics as unoriginal.

But Baidu also is an example of how many Chinese technology companies manage to outfox foreign competitors by tailoring existing technologies to China's growing and fast-changing market. While that may not earn them respect as global innovators, their understanding of the Chinese consumer has allowed many of them to beat bigger foreign rivals at their own game in China, home to the world's largest number of Internet users.

Baidu dominates China's Internet search market, holding a 61% share of industry revenue in the second quarter, compared with 29% for Google Inc., its biggest Internet-search competitor.

While that is partly the result of regulatory issues and loose enforcement of copyright protections in China that have enabled Baidu to provide access to unlicensed music downloads through its site, it also is the result of subtle but effective distinctions on its pages and of popular tools like Baidu Post Bar, an online message board that lets users create discussion topics.

For a long time, the search bar on Baidu's main page was longer and wider than Google's, says Liu Ning, a Beijing analyst with research firm BDA China Ltd. "This makes a difference for Chinese users, because Chinese characters are much more complex than English letters, and it helps to be able to see them more clearly," says Mr. Liu.

Post Bar, meanwhile, represented an early recognition by Baidu that many Chinese Internet users are drawn to online forums. Unlike some similar online forums where moderators predetermine the categories for discussion, Post Bar lets users easily create their own categories as hot topics develop and find related posts through keyword searches. This function is popular in China.

A Chinese Feel

Baidu isn't the only company that has benefited by taking existing technologies or ideas and giving them a Chinese feel.

Tencent Holdings Ltd., based in Shenzhen, popularized instant messaging in China by pairing the service with online games and blog hosting—heavily used applications in China—and by rewarding users for high usage with points that could be exchanged for prizes. Now, the Hong Kong-listed company has robust online game and music platforms, a massive social-networking site and a bigger market value than Yahoo Inc.—about $35 billion versus $25 billion.

Alibaba Group's e-commerce site Taobao.com, meanwhile, uses a model that appears similar to eBay Inc.'s online-auction model. It added an instant-messaging service that allows buyers and sellers to haggle over prices, similar to the way business is conducted offline in China. Taobao is now the primary destination for online shopping in China, with almost $12 billion in transactions in the first half of this year. EBay shut its own Web site in China and replaced it with one majority-owned by local player TOM Online Inc., a unit of Hong Kong-based TOM Group Ltd., but still has only a tiny fraction of the market.

Baidu and these other companies have taken advantage of the fact that foreign firms often struggle to adapt their businesses for the Chinese market.

Kai-Fu Lee, the executive who ran Google's operations in China from the time the company entered the market in 2005 until he resigned in September, says the firm's challenges included simply coming up with a name that Chinese people could pronounce. "Google" is a poor fit for Chinese tongues, and the Chinese characters Google chose for its name, which are pronounced "goo guh," also got a poor reception. In 2007, Google created a shortened version of its Web address for Chinese users that is easier to remember, in any language: G.cn.

Baidu, founded in 2000 by Chinese-born Silicon Valley veteran Robin Li, portrays itself as the true Chinese choice in Internet search. Baidu says on its Web site that its name—whose characters mean "hundred" and "degree"—was inspired by an 800-year-old Chinese poem because it "wants the world to remember its heritage" and that "Baidu focuses on what it knows best—Chinese-language search."

Some of Baidu's products, however, look remarkably similar to those invented by others. Its question-and-answer service, Baidu Knows, allows users to post questions about anything that can be answered by anyone. And just like Yahoo Answers, users can vote for the responses they think are most useful. One popular recent question on the Baidu site was: "What is the most expensive food in the world?" The most popular answer: "the gold foil used to decorate chocolates and other foods."

Baidu Encyclopedia, meanwhile, has been accused by Wikipedia users and the nonprofit Wikimedia Foundation, which runs the Wikipedia site, of having some entries that appear to copy Wikipedia entries word-for-word, without credit. Still, Baidu Encyclopedia now has close to two million articles, compared with the less than 300,000 on Chinese Wikipedia.

Baidu has benefited from the fact that censors periodically block content from the Wikipedia site, which isn't licensed in China. Baidu has had few problems with censorship because it restricts content that might draw fire from the government, such as information related to Tibetan independence. While Google does the same—a decision that drew international criticism—its content has often been blocked by censors, and users redirected to a page containing a Baidu search box.

'Just a Feeling'

Then there is Baidu's MP3 music-search service, which lets users search for songs and download or stream them directly through Baidu's Web site. While this is an innovation of sorts—analysts say Baidu was among the first sites to provide such a service—it is one that has generated criticism as well as user traffic, with the recording industry saying Baidu facilitates piracy by providing links to unlicensed versions of songs.

Baidu says it isn't doing anything wrong. "Baidu is dedicated to protecting intellectual property and will continue to act in compliance with relevant laws and regulations," a spokesman says.

Google this year began offering a music-search service that links users to licensed tracks. A spokeswoman says it is one of the "many unique and innovative products" Google has initiated for Chinese users. Google, she adds, will continue to seek ways to "provide a better user experience."

Even if Baidu's features aren't always original, some Chinese users say they don't care. "Google may have stronger innovations than Baidu, but some of their functions are not necessary for me," says Zhou Chanjun, general manager of a lighting company in Beijing. "I can't say why we think Baidu is more Chinese. It's just a feeling."

Don't Call It Bing in China... Unless You Like Pancakes
Story from WSJ

After a brief hiatus last week, software giant Microsoft's Bing search engine is back online in China.

Microsoft launched a Chinese version of Bing on June 1 at cn.bing.com, marking the first time the company has offered a Web product specifically targeted at the 298 million Web users in mainland China. But unlike its American counterpart (and like many of the other international versions of Bing), Chinese Bing is still a bit of a shell at this point, without all of the handy features that are available on the U.S. search engine.

And in China, Microsoft prefers not to call it "bing," since that sound can have several meanings in Mandarin, depending on the tone and character associated with it. For example, this word: 病. Pronounced bing (fourth tone), it means "sickness" or "to be ill," something most people would prefer to avoid. Other "bings" mean ice, soldier and pancake.

The Chinese version has thus been named "biying" (必应) which means "must respond/answer" and which Microsoft is marketing it as a"decision engine"– something that will provide information to assist Internet users with their decision-making processes.

Initial reviews in China have been mixed. Some users have expressed disappointment after comparing the Chinese version of Bing with China's other leading search engines Google and Baidu, as well as with the U.S. version of Bing. On his blog, Franky Xu noted that though the company is trying to provide unique features exclusively for Chinese users, the localization of the product is poorly done. "It's impossible to go back to the original U.S. version directly through the Chinese site, but you can do that with Google," he said, adding that "some of the recommended keywords didn't make sense." One feature he missed from the U.S. version is the pop-up window that shows a preview of another Web site when the mouse cursor is hovered over a Web link.

Without additional context or background information, users have also been confused by the daily home page images. "The picture is beautiful, but very non-China" said one user (in Chinese)."I guess eight or nine out of ten Chinese have no idea where it is when seeing this."

One function that has won over many users in China is the video search, which allows videos to be played directly from within the thumbnails on the search result pages (a feature that's not available on Google or Baidu).

But industry analysts say this new move by Microsoft is unlikely to alter the competitive landscape in China, since Microsoft's share of the search market has been negligible. The market is currently dominated by Baidu and Google, with respective market shares of 59% and 30.6%, according to Internet research firm Analysis International. (Google boosted its market share to over 30% for the first time this year through its launch of music search and free download service, according to analysts.) Other major players in the market include Yahoo China and Sohu.com's Sogou.