Baidu faces uphill road in Brazil

Updated: 2014-02-03 05:57

By JACK FREIFELDER in New York (China Daily Latin America)

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Analysts say leveraging previous successes could hold the key

Baidu Inc's move to test new search engines in Brazil, Egypt and Thailand is unlikely to increase the company's revenue or its share of the global search-engine market, analysts said.

Echo He, who covers China's leading search-engine provider for Maxim Group LLC, a New York-based securities and investment management firm, told China Daily on Wednesday that while the company's plan to "expand and have an international footprint" is strategically important and may increase its research and development investment, the move is not expected to materially add to its revenue, at least in "the foreseeable future".

Baidu "has always had its main operation in China", but it "wants to expand and have an international footprint," He said.

Headquartered in Beijing's Haidian district, Baidu is a household name in China. But the company has been trying to raise its international profile by moving into search markets beyond its borders.

In 2008, Baidu tapped Japan as the market for its first release of a search engine outside China. In 2012, it expanded its reach to Brazil by setting up an office in Sao Paulo — bringing it closer to rival Google Inc's US home market.

"Overall, Baidu's most significant effort was getting into the search engine market in Japan," He said. "Baidu Japan is almost irrelevant in the Japanese market, and Brazil is a smaller market than Japan. If Japan did not generate an impact on Baidu's revenue, I don't think Baidu's Brazil operation will be material."

The analyst said Baidu's recent history does not bode well for the company's attempts to break into new markets.

"From a historical experience, Chinese companies are not very successful at connecting directly with customers outside of China," He said. "China's market has a different dynamic than external markets, so whatever they're doing in China may not work outside of China."

The impact of the moves would have to be significant to affect the company because of Baidu's vast size, she said.

Although Baidu has not formally launched its new services, its Brazilian page can be accessed at Visitors can connect with a number of online hotspots, including YouTube, Facebook, and Hao123, Baidu's local Web directory.

Data from Analysys International, a China-focused Internet market-research firm, shows that Baidu captured more than 75 percent of the market in China in the third quarter of 2013.

However, Baidu's attempts to expand beyond China's borders continue to meet stiff competition in the form of Google.

According to analytics firm Net Applications, Google accounted for 68.1 percent of all searches conducted on desktop PCs in December, while Baidu garnered just 18.8 percent.

Scott Kessler, an analyst who covers Baidu for financial services provider S & P Capital IQ, said the company's latest endeavors make sense but "it remains to be seen how Baidu will leverage its success in other markets."

Baidu "has been a very successful company, but what's interesting is the success has been solely predicated on its offerings in China," Kessler said in an interview. "Ultimately, we expect the company to continue these types of investments, but we have a level of skepticism as to whether they are going to gain traction any time soon."

"The fact that Baidu wouldn't necessarily have the edge associated with being a ‘homegrown offering' poses additional challenges to something that is inherently pretty difficult," Kessler said.