Baidu’s Business Model: An Overview

Incorporated in 2000, Baidu is one of the major web service companies in China. It is similar to Google and provides services such as web searches, news, music, pictures, and forums, etc. As of 2010, Baidu holds 70% of the web service market in China.

Baidu follows the traditional advertising business model as seen with many other web service websites. It provides most of its information for free and relies on ad banners to gain revenue. One interesting aspect of Baidu is that it has its own advertising service called Baidu TV, which allows the advertisers to bid for spaces on Baidu Tv to advertise with its own system of matching. In 2011 Baidu is expected to have a revenue of 4 billion Yuan(about 500 million dollars) from advertising.

Switching costs for Baidu is quite high for users in China, as few other foreign alternatives are “allowed to exist” in China. The Chinese government has protected and subsidized Baidu against virtually all foreign competitors since its inception, giving Baidu an extremely favorable advantage within China. Baidu is now even more dominant after the departure of Google in Mainland China and its market share in China is expected to rise above 70%. As of 2011, the only remaining competitive web service company in China is Sogo. For users in China, there are few alternatives. However, users around the world may find that many Baidu results are censored or politically biased. Other “sensitive” information may not even exist on Baidu. Its news items lack transparency, and as a result may turn to other search engines for more reliable information.

Baidu’s “unique” music service allows users to download music for free online when they search with Baidu. And though extremely controversial, the music service has provided Baidu with a distinct advantage over its domestic as well as foreign competitors.

While Baidu is a giant in Mainland China, it still wants to expand its market globally. Baidu can attempt to achieve a wider recognition around the world by forming alliances and buying out new, popular sites just as Google has done with Youtube. For example, Baidu recently partnered up with Dell to produce tablets and phones in an attempt to compete with Google’s Android. It must continue to innovate itself and attempt to somehow make its results less saturated with censored information.

As for Baidu’s Chinese competitors, I think it is very important for them to attempt to seize the relatively open markets of Asia web services firsthand. There are still potential for markets shares to be gained in Southeast Asia and the Chinese speaking regions such as Hong Kong, Macau, and Taiwan.


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