Jennifer Li reflects on Baidu’s strategy so far, opportunities for the future and the allegations of Baidu being a Google clone
In a little over a decade since it came into being, China’s first homegrown search engine, Baidu, has become a formidable internet giant. Today Baidu commands over 85% of the Chinese search market, and in terms of marketshare, it is counted among the top three search engines globally. It has also started to create a global footprint.
While web search is Baidu’s proven business model, it accounts for only about one-third of the overall traffic. The majority of traffic now comes from other ancillary products, like vertical search or community knowledge-based products such as Baidu Knows (Baidu Zhidao, an interactive knowledge-sharing platform), Baidu Encyclopedia (Baike Baidu, a collaborative encyclopedia) and PostBar (Baidu Tieba, an online community to share views and experiences).
Jennifer Li joined Baidu as Chief Financial Officer in early 2008 after successful stints at GMAC and General Motors in various capacities and across geographies. Li, who is often referred to as the ‘Sheryl Sandberg of China’, is counted among the most influential businesswomen in Asia according to Forbes, the Wall Street Journal and Financial Times.
In this interview, Li reflects on Baidu’s strategy so far, opportunities for the future and the allegations of Baidu being a Google clone. Excerpts:
Q. In the last decade or so since Baidu’s inception, how has your strategy evolved?
A. The first change was the shift from an enterprise service to an independent, general search engine. At the time, the majority of Baidu’s income was coming from our business associates, the B2B kind of business. (Baidu CEO) Robin (Li) sensed the explosion of internet usage and what a search engine can offer. So he pulled the plug on the B2B business. [Editor’s note: Baidu already had 85% of the market at that point so there wasn’t much room to scale from there.]
Q. In some senses, that was also a painful decision.
A. Yes, it took a lot of guts to do it, because you are basically trying to reinvent yourself. You make that critical decision and challenge yourself, and only then you re-emerge and become something that you never thought you could be. There were many other things that happened along the way, like PostBar which was launched in 2003. The company is very innovative and creative. (Back then) there was not a lot of information online and to create more activities online and generate content, they came up with these products. So Baidu Knows and Baidu PostBar are about user-generated content. By creating a product like that, users engage more with the internet and they are offering much more quality content that can be used by search engines. People look for something that can actually produce results for them. We’re not only a web search waiting to use our spider to grab everything that is available out there, but we also think about ways to create more activities and content online.
Another point is about competition with Google (in China). We had internet users who were not very active and we wanted to stimulate their activity, but at the same time we had competition—many of them very strong, powerful and resourceful as competitors. Because the internet content was growing fast, one of the things we did was expand our index size like crazy. Google set a pace to enlarge their index size, but they underestimated how fast the Chinese market was exploding. With more content indexed, of course, your search results are better because you have more things that you can choose from. That was one reason why our search results are so much more relevant than Google’s. Users learn fast. If they experiment on different search engines and they get to see what they like and not so much in another search engine, that forms a habit. That was very critical in the way Baidu grew. Many things that the company did was about the right decision executed well at the right time.
Q. The dominant perception outside of China is that Baidu is just a clone of Google. How do you deal with such perceptions?
A. If you look around today there are only a number of search engines available. Google is obviously the most powerful one. Then you have Yandex in Russia and NHN Naver in Korea. The funny thing is that while everybody knows Google, when Yandex went public in 2011, in their IPO brochure they said, ‘We are the Baidu of Russia’. So there’s difference in the search service that Baidu does versus Google’s. Yandex knows that because they face similar issues. Still a lot of people think that Baidu is the Google of China.
I would also go back to the very beginning. I would always challenge (the notion) that we were purely derivative by pointing out that Robin was one of the leading luminaries in search. The core idea at the heart of all market search engines, Hyperlink Analysis, is something he both applied and received a patent for prior to (Google co-founder) Larry Page for Page Rank. In fact, Robin’s work is cited in Larry Page’s. We started doing what Google was doing at around the same time. And really if there is anyone to be credited, I think we were both looking to the same company for business model inspiration—GoTo, which later became Overture.
Google is now taking a page from our playbook, and looking at delivering information structure data, content—by which I mean digitally consumable content—and applications directly to the search engine results page.
Q. China’s internet market is exploding. How is Baidu gearing up for the opportunity ahead?
We have to offer a differentiated value proposition. Because we have gained tremendous experience in this market of all the different kinds of products that we offer here are very unique. Along the stage of how the country has evolved from an internet development stage perspective, we have much experience there. So it makes sense for us to establish presence in some of the developing countries. (It is) still early stages for the global efforts, and (there are) a lot of challenges for Chinese companies to go beyond their borders—cultural, managerial, familiarity with the local market—but it’s worth experimenting. (See ‘Baidu’s Globalisation’)
Q. So is it safe to say you are really a search player and you add value to search and that’s where you will stay?
[This article has been reproduced with permission from CKGSB Knowledge, the online research journal of the Cheung Kong Graduate School of Business (CKGSB), China's leading independent business school. For more articles on China business strategy, please visit CKGSB Knowledge.]