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Profile of Baidu
Business Strategies Group Ltd, April 2008, Pages: 12
Baidu.com is a Chinese language search engine that enables users to find websites, audio, video and image files based on key word search terms. Baidu offers a variety of other online community services including blogging, instant messaging and a collaborative encyclopaedia as well as supporting mobile search. Listed on NASDAQ, it is one of the most prominent Chinese Internet companies. As Google is in North America, it is relevant to business media companies active in China as Baidu is absorbing so much targeted advertising spending which would once have naturally been directed towards speciality publishers. So, having a good understanding of what Baidu is doing is vital to any business competing for B2B marketing spending in the Chinese market.
The company has a number of agreements in place with companies such as China Netcom, Microsoft and EMI. Recently, Baidu has also announced a number of important new product and service launches. In October, the company stated that it will enter China’s consumer-to-consumer ecommerce market at unspecified date in 2008. In January this year, Baidu entered the Japanese search market with the official launch of Baidu Japan and in February Baidu Hi, an instant messaging service was launched.
Baidu is the market leading search engine in China with a 60% marketshare. Google is a distant second with 25.9% and Yahoo China is third with 9.6%. Baidu claims to have indexed over 740 million webpages, 80 million images and 10 million multimedia files. Baidu.com places 19th on Alexa’s Global Top 500, a list which ranks websites based on user traffic.
Beijing-based Baidu was founded in 2000 and had 6,000 employees at the end of 2007. Baidu listed on NASDAQ in August 2005. In 2007, the company recorded revenues of US$239 million which is a 108% increase over the same figure in 2006. Net income was US$86 million - also a 108% increase over the previous year. Baidu’s market capitalisation is approximately US$10 billion.
Baidu generates almost 100% of its revenues from online marketing services which primarily consists of paid search advertising. In 2007, Baidu recorded 214,000 active online marketing customers. That is a 49% increase over the same figure in 2006. Baidu’s revenues per online marketing customer averaged US$1,110 during 2007 - a 40% increase over the average in 2006. Baidu’s management noted that both its number of active marketing customers as well as the average revenue per customer is growing.
Costs are also increasing, but not as quickly as revenues. Traffic acquisition costs were US$28.1 million in 2007 - an 11.7% increase over 2006. Selling, general and administrative expenses in 2007 were US$56.4 million - an increase of 64.3% from 2006. Baidu’s management maintains that the increase is largely due to the expansion of both their direct sales force and their distributor network. Another significant cost, research and development expenses were US$19.3 million in 2007 - a 77.6% increase from 2006. The company claims that this is primarily due to an increase in the number of R&D staff in Beijing.
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