Baidu vs. Google
In the village of Laishui, about 100 miles southwest of China's capital city, Li De Yin runs a small workshop that seems frozen in pre-industrial time. Bare-chested workers heat copper bowls over an open-coal fire then hammer the yellow metal into hot pots, the Chinese version of fondue pots.
But walk into Li's tidy bedroom, and an ice-blue glow lights the room. It comes from a state-of-the-art personal computer whirring beside a twin-size bed, an audio and video hookup at the ready, in case Li needs to speak to a customer.
Online business accounts for half of Li's sales these days. And the bulk of it is generated by a search engine unknown to most Americans but a household name in China: Baidu.com.
Before he advertised online, Li limited his business to the restaurants he could serve from his truck route through southern China. Now the Baidu connection has landed clients in Taiwan, Korea and Hong Kong.
"These are customers we never had before," he said. "I'm making more money. I like that. It's a good thing."
For Google, though, this is not so good. The Mountain View, Calif.-based behemoth has set its sites on capturing the vast and lucrative China Internet market, the world's second largest. But Baidu beat them to it, and the canny, swift-footed competitor is proving exceptionally tough on its home field.
Baidu has virtually copied Google's clean-screen look, but the rest of the Baidu game plan is original. It plays to nationalist advantage by attacking Google as a foreign invader. It promotes itself in such splashy ways as a huge neon sign on the banks of the Pearl River in Shanghai. And it has flourished by aggressively marketing itself in ways verboten at Google: Baidu lets advertisers pay for placement in its search results.
The formula is working. Despite a big marketing push from Google over the last year, Baidu is the first choice of 62 percent of Chinese users, up 15 points over 2005, according to a study released in September by the China Internet Network Information Center. Google's share dropped eight points, to 25 percent--a rare setback.
If Baidu keeps winning, local players elsewhere might copy Baidu's tactics, disrupting Google's plan to expand globally.
The battle for China shows how tough it's getting for Google as it seeks to extend its record as the biggest phenomenon of the Internet economy. Google has changed the way people find old friends, do book reports and search for arcane information. The technologies it hasn't invented, it has simply bought: from a gee-whiz mapping service to the popular video site YouTube.
Google argues that it's too early to draw any conclusions about its competition with Baidu. "We're in sort of inning one of a nine-inning game," said Sukhinder Singh Cassidy, Google's vice president for Asia-Pacific and Latin America Operations. "It is very early to call a winner in the China search market."
Baidu has decoded China's cultural cryptography in ways that have eluded Google. A key example: Baidu's embrace of paid search results. For many popular search terms, Baidu will rank results by how much an advertiser is willing to pay for prominent placement.
Google and the other U.S.-based players don't embrace pay-for-placement. For U.S. users, it would undermine a search engine's credibility.
In China, though, surveys have shown that users trust paid results. Many believe that an advertiser's willingness to pay for placement reflects a confidence that they've got just the right answer to the user's query. If a Chinese user queries "mah-jongg" and an advertiser is selling hand-carved sets, well, that's a match.
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