As Google (GOOGL)
maintains its stronghold in the global Internet search arena, Baidu, Inc. (BIDU) has the upper hand in China with 82 % of the nation’s online search queries. Google China, a subsidiary of Google, ranks a distant second in China’s online search market with a 10% share.Both Google and Baidu are listed on NASDAQ and operate in similar web services spheres, but the companies are quite different. Baidu remains focused on the local Chinese market while Google is global and continues to expand. (See related: Baidu Versus Google: Who Will Win The Global Search War?)
Contrary to the common perception of Baidu as an “online search specific” company, it has a large suite of products and services somewhat similar to Google. (Here is a full list of products and services offered by Baidu.) Both companies have multiple offerings across search products, social products, knowledge products, location-based products, music products, PC client software, mobile products and services, open platform for developers, games, and translation services. Nonetheless, here are the key differences between Baidu and Google:
- Baidu remains a Chinese company, fully compliant with the local laws and censorship, as directed by the state government. Google has had a few rough patches with the Chinese authorities over freedom of speech and free access to information. While Google continues it operations in China, its capacity is limited.
- Baidu banks on its comparatively better understanding of local Chinese language and culture, which enables it to better optimize its search technology to the needs of local users. The Chinese language is complex with some words having multiple meanings. Baidu’s search algorithms place a lot of relevance to the context in which the words are used in the content. Google, both as business and as technology, appears to have struggled on these fronts in China.
- Baidu is reported to control around 80% of Chinese online search market, while Google has a roughly 10% share. The reserve is true in the rest of the world – Google is reported to have 90% share of global searches, while Baidu has just 1%.
- Baidu is expected to continue its dominance and growth in China, based on its localized offerings in the world’s most populous nation, which still has limited Internet penetration. Google is strong in rest of the globe. Google continues to diversify its products and offerings to expand its business in developed markets, including experimenting with offerings like a high-speed broadband network called “Google Fiber” and driver–less cars. And while still small compared to Baidu, Google has recently improved its market share in China.
- Baidu is now reported to have 80% of China’s mobile search market, while Google has only 1%.
- Google’s timely bet on buying the mobile operating system Android has allowed it a head start in the global mobile search market. It now contributes increasing proportions to Google’s revenues. Lately, Baidu has built its own mobile search apps and has partnered with mobile manufacturers to integrate the Baidu search in smartphones.
- Google has unique offerings at a global level, but isn’t that strong in such China-specific services. Baidu has unique offerings like a missing person search, senior citizen search, and patent search, which are specific to Chinese legal requirements.
- Both companies generate revenue primarily through online advertising, but Google’s diversification is higher compared to Baidu, and continues to increase. Bloomberg reports that Baidu generates 99.7% of its revenues from online marketing and ad services, while Google’s advertising revenue constitutes 88% of its total. The rest of Google’s revenue comes from its Android technology platform, YouTube video technology, and other services. (See related: Baidu Earnings: What to Watch? and Baidu Investors: Watch These Metrics in 2015.)
The Bottom Line
While Baidu continues to have the lead position in the Chinese Internet search market, Google remains the undisputed leader globally. Baidu’s local concentration on China remains a concern from an investor’s perspective, especially due to increasing domestic competition. Although Baidu’s adherence to state-controlled policies is seen as favorable for its business, it will face stiff competition from other Chinese players like Soso, Sogou and Qihoo 360. If Google can increase its share in the burgeoning Chinese market, it will add significantly to Google’s business and potentially take away from Baidu.