The Launch of Baidu "HI" in China
April 9, 2008
In March 2008, Baidu (Nasdaq:
BIDU) launched its "Baidu HI" instant messaging (IM) service, and it shook
China's Internet world. Baidu, and not Google, is the search engine leader
in China, accounting for nearly 60% market share.
And in China, IM adoption
is much higher than email; Chinese users are as likely, if not more so, to
exchange IM addresses as are email. Baidu HI beta has been out for quite
some time, and initial interest has been strong.
IM in China has quite a
number of what is considered basic features, such as voice/video chat, IM
groups, file transfer, and user personalization. Baidu HI has almost all
Given Baidu's dominance in
search and the strong prevalence of IM, we examine what are the advantages
and challenges Baidu has, and will increase the chances of Baidu HI's
Besides being the search
engine leader in China, Baidu has steadily built an online community around
its search. There are built-in synergies Baidu HI has with Baidu's other
To start, Baidu HI is
integrated Baidu Space, the company's online blogging service launched in
2006. But this appears just the first step.
Baidu Zhidao (directly
translated means "Baidu Knows") is the leading online question and answer
forum in China, and one of Baidu's core products. According to the company,
over 10 million Chinese use the platform every day and its popularity is
nearing that of Baidu MP3. Even more users go to Baidu Tieba, one of China's
largest online communities.
With such a rich online
community developed, users in the past had to use IM through providers. The
launch of Baidu HI appears to fill this need naturally.
Big challenges still
The biggest challenge is
that Baidu will be entering into a crowded IM space. Competitors include
large, resource-rich, and entrenched ones such as Tencent's (HKEX: 0700) QQ
and Microsoft's (NASDAQ: MSFT) MSN Messenger. From the mobile side there is
China Mobile ((NYSE: CHL) Fetion.
There are also a number of
second-tier IM players, such as Netease (NASDAQ: NTES) Popo and Lava-Lava.
Even Google's (NASDAQ: GOOG) Google Talk has experienced mixed success in
the China IM market.
Baidu HI critical
In order for Baidu HI to be considered a success, it must either be able to
generate profit in the longer term, or generate profit "leads" for Baidu's
other products. We consider the factors for such a scenario:
Notwithstanding Baidu HI's clever viral marketing of allowing select
users to create IM groups, Baidu HI must have features that are as
powerful, if not more so, than its competitors. It appears from their
initial launch that they have achieved this.
Timing. Too early,
and Baidu HI risks not having enough of a loyal user-base to gain
necessary momentum. Google Talk is a case in point. Google did not have
enough of a Chinese online community at its Google Talk launch; hence, it
lacked a strong start which still plagues it today. Baidu chose to launch
Baidu HI after it had established its online communities.
Too late, and strong IM
competitors will entrench further. Baidu appears to have the right timing
here, given the strength of its current IM providers.
Synergies. Baidu HI's initial competitor will not be the IM
providers like QQ or Messenger; rather, its focus should be on enhancing
and completing the overall Baidu online community experience. Lose sight
of this focus, lose Baidu HI's fundamental value proposition, at least
Baidu has announced, at the end of 2007, its plans to launch C2C trading
services. This can be a compelling move for Baidu, given its online
community. One of the biggest inhibitors to China's consumer e-commerce
development is the lack of trust. If a person buys from somebody he or she
does not know, will the product the right one, and shipped on time?
Baidu's brand, established
online communities, and in the future, C2C trading platform, will go a long
way to overcome the lack of trust barrier. Baidu also has a virtual currency
offering that the company can leverage. And Baidu HI can further establish
trust with direct communication. Equally important to Baidu is the C2C
profit potential. Other C2C trading business models have been proven cash
Of course, other very
formidable competitors have already thought of this. Alibaba's (HKEX: 1688)
Taobao is the largest C2C website in China, and it has elements of an eBay,
Amazon, Facebook and MSN which allows the Chinese shopper to search, browse,
trade and purchase products. Alibaba's Taobao Wangwang IM enables instant
communications between buyer and seller. The number two and three C2C
websites are Eachnet (formerly Ebay China) and Tencent Paipai.
Competing from a
position of strength.
It comes down to optimally
configuring and leveraging Baidu's assets, and in particular, Baidu's
various online community offerings. Baidu may also supplement additional
value-added services to complete the overall online experience. Baidu's move
in IM with Baidu HI is a smart one.
Baidu's move is coming from
a position of strength, but doing so also moves it right in line with other
large, successful competitors. If Baidu finds success in its C2C platform,
then Baidu HI's other competition may be directly to the existing IM
providers, such as QQ and Messenger. But the competition will no longer be
just IM, but IM within the overall online community and trading experience.
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Unless otherwise specified,
all information provided is sourced from CCID Consulting.