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Search site moves at the speed of China

December 10, 2007|Dawn C. Chmielewski | Times Staff Writer

BEIJING — Diners often plunge their chopsticks into shared entrees at even the most upscale restaurants here. This mouth-to-plate maneuver might be considered a faux pas in the germ-phobic West, akin to George double-dipping a chip in "Seinfeld."

But appreciating such cultural differences is what Inc.'s chief financial officer, Shawn Wang, says gives the Chinese search giant unique insight into the country's 1.3 billion people as it competes with American rivals such as Google Inc. and Yahoo Inc.

That knowledge informs innovations large and small, such as Baidu's bowing to local preference in popping up a new browser window when users click on search results. It can also produce features, such as its MP3 search for digital music downloads, that infuriate the entertainment industry.

"It's just different people, different culture, different behavior," Wang said. "These are things that connect people together in a way people in the West couldn't imagine."

On Tuesday, Baidu became the first Chinese company to join the Nasdaq 100 index, placing it among the world's most valuable technology companies.

Founded in 2000, it boasts a stock market capitalization of $13.3 billion and conducts more than 60% of search queries in China, the world's fastest-growing major Internet market.

Baidu's success mirrors the ferocious growth of China's technology industry, which is led by scrappy innovators who are used to fighting for loyalty on the Web like the street-corner barkers they grew up around.

Consider Baidu founder Robin Li, 39. He was born in an impoverished region 200 miles southwest of Beijing and endured the privations of the Cultural Revolution. He was a sophomore at Beijing University during the Tiananmen Square crackdown of 1989.

He has been quoted as saying that the experience prompted him to leave China after graduating, although now he says he was merely following the crowd.

"At that time China was still pretty much a planned economy," Li said. "There was not much opportunity for us to do anything with big impact."

Li traveled to the United States, earned a master's degree in computer science at the State University of New York at Buffalo, and made his way to Silicon Valley in 1997. He worked on search engines at Infoseek Corp. for two years before returning home.

"The U.S. market was already crowded and China was taking off," Li said. "When I came back to China, there were only 8 million Internet users. Today, we have over 160 million users. It was good timing for me to start something in China."

His audacious dream took wing. The company's third-quarter revenue and profit more than doubled over the same period last year, to $66.3 million and $24.2 million, respectively.

Chinese Internet users say they prefer Baidu's search results over Google's. Baidu plays up the East versus West theme in its advertising with slogans such as "We know Chinese best." Google, which captured the U.S. market through sheer technical superiority, has never needed to advertise to woo users.

Perception isn't necessarily reality. One recent study, by search engine marketing firm Enquiro Search Solutions Inc., discovered that Chinese-speaking searchers on average took half the time to find what they were looking for through Google -- 30 seconds versus 55 seconds through Baidu.

Still, Baidu is trouncing its American competitors here with 74% of search queries compared with 18% for Google, according to the latest data from IResearch Consulting Group in Beijing.

"We're pleased with our progress in China, and we're committed to developing innovative products to best meet the needs of our local users," a Google spokeswoman said in an e-mailed statement.

Yahoo, which in 2005 effectively paid $1 billion for to take over its Chinese operations in exchange for an equity stake in the booming Chinese company, controls 3% of the market.

It's difficult to assess the effects of the Chinese government's Internet censorship. Baidu follows the rules, without drawing attention to what's omitted, while competitor Google publicly shows its disdain whenever searchers look for a verboten term, such as Falun Gong, the name of an outlawed spiritual group.

Included within the results is a disclaimer that states, "Because of local rules and policies, some results weren't displayed."

"The Chinese people were quite indignant," said a digital analyst who spoke on condition of anonymity. "That's like coming here and saying, 'I'm in your house, I'll eat your food, but let me tell you upfront that I don't particularly like it.' "

Li said Baidu simply does a better job of figuring out what its users want in a country where Forrester Research estimates that 38% of Internet users are members of Generation Y: 18- to 27-year-olds looking to be entertained.

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