Starting Points: Baidu

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Apr 19, 2010

Entertainment Trumps Politics on Chinese Web Sites - NYTimes.com

By DAVID BARBOZA

SHANGHAI — The daily Web habits of a typical 18-year-old college student named Li Yufei show why American Internet companies, one after another, have had trouble penetrating what is now the world’s most wired nation.

He writes a blog, downloads Korean television shows, manages two Web sites devoted to music and plays an online game called Rongguang Hospital, at Baidu.com.

“I started doing a lot of this when I was about 11 years old,” says Mr. Li, a freshman at the Shanghai Maritime University. “Now, I spend most of my leisure time on the Internet,” he says. “There’s nowhere else to go.”

Google’s decision last month to remove some of its operations from China has overshadowed a startling dynamic at work in this country, a place where young people complain that there is not a lot to do: the Internet, already a potent social force here, has become the country’s prime entertainment service.

Image via CrunchBase

Frustrated with media censorship, bland programming on state-run television and limits on the number of foreign films allowed to be shown in China each year, young people are logging onto the Web and downloading alternatives. Homegrown Web sites like Baidu, Tencent and Sina.com have captured millions of Chinese youths obsessed with online games, pirated movies and music, the raising of virtual vegetables, microblogging and instant messaging.

Even though Facebook, Twitter and YouTube are blocked by censors here, Chinese social networking sites like QQ Zone, Tianya.cn and Kaixin001.com are flourishing in surprisingly inventive ways.

A study conducted by the Boston Consulting Group found that people in China (which now has nearly 400 million Internet users) are far more connected than Americans, and that globally only the Japanese spend more time on the Web.

Analysts say Google struggled to gain market share in China partly because the company had failed to build a big enough online community around its search engine, unlike its chief rival here, Baidu.com.

The surprising power of online communities in China has Communist Party leaders worried about the ability of online social networks to spread viral messages that could ignite social movements, and pose a challenge to the party and its leaders. They saw what happened to Han Feng, a midlevel party official in southern China, when his private diary was recently posted online.

In the diary, Mr. Han catalogued not just the hefty bribes he was taking, but detailed his sexual escapades with co-workers and mistresses. The ensuing online uproar led to his sacking and a criminal investigation.

“For the government, the scary part of the Internet is the unpredictable power of its organization,” said Yang Guobin, an associate professor at Barnard College and author of “The Power of the Internet in China” (Columbia University Press, 2009).

“Although people are there socializing, it can provide a platform for lots of other activities, and even turn political,” he said.

But young people in China say they are excited about the Web not because it offers a means to rebellion, but because it gives them a wide variety of social and entertainment options.

One of the more remarkable developments in the Internet in recent years has been the informal network of young people who volunteer to produce Chinese subtitles for popular American television series like “Prison Break” and “Gossip Girl.”

The Chinese subtitles are often translated within hours of the program’s showing in the United States, and then attached to the video and made freely available on Chinese file-sharing sites.

Chinese Internet companies have gleaned a lesson from this: entertainment trumps politics on the Web in China.

“The Web is really a reflection of real life,” says Gary Wang, founder and chief executive of Tudou, one of China’s biggest video-sharing sites. “What people do in real life is they go to karaoke rooms, they go to bars, they get together with friends and they shop. And that’s what they do online.”

Baidu is one of the companies that recognized the link. Founded in 1999, Baidu — which got an early investment from Google — quickly established itself as China’s largest search engine.

By the time Google sold its stake in Baidu and set up its own Chinese-language search engine in 2006, Baidu was already expanding its site in the hopes of building a community that would stick around longer on the site.

One of the company’s most popular offerings is the Baidu Post Bar, an online bulletin board of hot topics that now accounts for nearly 15 percent of the site’s traffic. (Among the most popular topics in recent weeks was a television anchorwoman’s ties to a corrupt official).

There is also Baidu Knows, Baidu Space (for blogs) and Baidu Baike, a Chinese version of Wikipedia.

Now, the company is working on an online video site that would work much like Hulu.com, the site in the United States where several broadcast TV networks present their shows.

Every Chinese Internet company seems to be building its own online conglomerate to offer online games, shopping, blogs and bulletin boards. Few companies want to specialize.

Just like American TV networks, state-run networks in China are worried that entertainment is migrating to the Web and that young people are souring on television. So they are trying to jazz up their offerings with reality shows or programs modeled on “American Idol.”

Sometimes, though, network news divisions get even by investigating the follies of their Web competitors.

In 2008, for instance, China Central Television — the biggest state-run network — ran an exposé on how Baidu accepted money to bolster the search results of unlicensed medical companies.

Baidu reviewed its policies, but also cleverly managed its way through the scandal by paying more than $5 million to be a sponsor of the state network and by courting the Chinese press.

Several Chinese journalists say that soon after Baidu suffered bad publicity, the company offered to fly a group of journalists to Hong Kong for a leisurely weekend at a luxury hotel.

A spokeswoman for Baidu declined to comment on the Hong Kong press outing, but media coverage of Baidu improved.

Google’s late start in China made it difficult to keep pace with Chinese competitors, who were constantly rolling out new things to appeal to young Web users.

Analysts say Microsoft’s new search engine, Bing, also has little chance of succeeding. Although Microsoft has spent years building a presence in China and working with the Chinese government, the company’s online offerings have fared poorly.

“I don’t think Bing will come even close to Baidu,” said Lu Bowang, president of China IntelliConsulting in Beijing. A Microsoft spokesman declined to comment on Bing’s China strategy.

Mr. Li, the Shanghai Maritime University student, says he surfs the Web to find or build his own community. A shy person with no siblings, he now has 300 online buddies, and says he turns to the Web to find what he cannot find anywhere else, particularly on state-run TV, which banned some Korean shows years ago.

“The State Administration shut down a lot of the popular Japanese and Korean series a long time ago,” he says. “So I have to go online to find things like this.”

Chen Xiaoduan contributed research.

Jan 18, 2010

Chinese Internet search firm Baidu looks forward to life after Google

Image via CrunchBase

By Steven Mufson
Washington Post Staff Writer
Monday, January 18, 2010; A12

BEIJING -- In 2000, a 31-year-old software engineer named Li Yanhong, a.k.a. Robin Li, left his job in Silicon Valley and returned home to China to start an Internet search engine. He raised $26.2 million in venture capital, including a modest investment by Google.

Ten years later, Li's company, Baidu, has become the dominant search engine in China, a goliath with 7,000 employees and a market value of $16.2 billion on the Nasdaq Stock Market. Google, which sold its stake in 2006 when it launched its own Chinese site, has lagged far behind, capturing less than half of the market share Baidu has here.

In a country obsessed with economic advancement, Li, a graduate of Beijing University and SUNY at Buffalo, has attained what Chinese newspapers have called pop-star status, with fans thronging Baidu conferences. And to many here, his company's success has become a point of national pride, even though its initial investors were virtually all American.

Now investors are betting that Baidu will reap the benefits if Google ends up exiting China over its dispute with the government about alleged cyberattacks on Google e-mail and source code. Since Tuesday, when Google announced that it would stop censoring its search engine even if that meant losing its Chinese business license, Baidu's stock on the Nasdaq has surged 21 percent to a new high, adding $2.8 billion to the company's market value in just three days.

Although investors are happy, China watchers are worried about the political consequences of Chinese Internet users depending too heavily on Baidu for news and information.

The company has been accused of altering search results for advertisers, by either deleting content or pushing firms' sites higher up on the search result lists in return for payments. The charge has prompted the company to launch an overhaul of its listings.

Moreover, as a Chinese company, Baidu has little choice but to comply with government demands for censorship. An industry source familiar with the firm said officials from the Ministry of Industries and Information Technology are stationed at its offices.

The company does not pretend to have a mission, as Google does: "Don't be evil."

"Baidu does face the same censorship issues, but without the corporate culture that resents censorship," said Jeremy Goldkorn, founder of a blog called Danwei.org and an online media expert in Beijing.

In an item he posted last week on his blog, Baidu's chief product designer, Sun Yunfeng, said that in China, "every enterprise or every individual must dance with shackles."

"This is the reality," Sun wrote. "Do as much as you can is the real attitude to have as a business or a person." The posting was later taken down from his blog, but reprinted on other sites.

"Whether it's Baidu or Chinese versions of YouTube or Sina or Sohu, Chinese Internet sites are getting daily directives from the government telling them what kinds of content they cannot allow on their site and what they need to delete," said Rebecca MacKinnon, an Open Society fellow and co-founder of GlobalVoicesOnline.org, a network of bloggers and online activists.

MacKinnon said she has compared search results on Google's China search engine and Baidu over the past four years and that "consistently, Baidu has censored politically sensitive search results much more thoroughly than Google.cn." She added, "There are a number of very sensitive terms that get no results from Baidu. On google.cn, you get sanitized results but at least you get results."

Meeting Chinese needs

Baidu owes much of its success to the vision and drive of its founder. Li, who declined to be interviewed for this article, tailored Baidu to what he believed were the needs and tastes of the Chinese. He made the search engine box longer and wider for Chinese characters. He introduced a feature that people with interests in, say, basketball could use to find other people with similar interests and exchange views.

More important, Baidu also linked to sites where people could download free music MP3s, largely pirated. That accounted for much of Baidu's traffic in its early years and about 20 percent of it as late as 2005, according to an industry source familiar with the company. Today, Baidu has captured two-thirds of the Chinese market.

Although the company said it couldn't possibly monitor the multitude of sites run by third parties, critics say it turned a blind eye to the legal issues. The People's High Court of Beijing has twice ruled in Baidu's favor in copyright infringement suits brought by record companies. Today, music downloads account for well under 10 percent of Baidu's traffic, the industry source said.

More recently, Baidu has introduced a Wiki-style service called "Baidu Zhidao" or Baidu Knows, where people can plug in questions and get replies. It has also courted beginners on the Web, a large category given that the number of Chinese Internet users -- 338 million at last count in the middle of last year -- is growing about 30 to 40 percent a year.

Success despite setbacks

In a business dominated by U.S. giants such as Google, Yahoo and Microsoft, Baidu has played to national pride.

The name Baidu (by-DOO) means "100 degrees" but was inspired by a Song Dynasty love poem in which it means 100 times. A man is searching for his true love during the traditional Lantern Day Festival. "A hundred times I search for her in the crowd and turn around just to discover she is there where the lantern lights are dim," the man writes.

The firm has "managed to convince a lot of people that, as a Chinese company, they have a grip on the subtleties of the Chinese language," said Kaiser Kuo, an Internet consultant and musician. In one ad, Baidu featured a bumbling, inarticulate foreigner in Chinese garb meeting a clever Chinese character who talks circles around the befuddled foreigner.

Baidu has its critics. Many of them think that the company's ardor for money prompted it to accept payments in return for deleting negative reports. When the Sanlu Group was found to have sold dairy products containing kidney-damaging melamine, critics alleged that Baidu had agreed to filter out relevant pages from its search results, citing a document purporting to describe an agreement between Sanlu and Baidu. Baidu denied the accusations, but the incident damaged the company's reputation and for a time drove traffic to other sites, according to one competitor.

There have been other controversies as well. In November 2008, China Central Television said Baidu's paid search service, which let Web sites pay to be listed higher among search results, highlighted links to unlicensed companies that offered medical products or services. CCTV said the sites sold treatments -- many of them fake, useless or unlicensed -- for cancer, sexually transmitted diseases and other ailments. CCTV also said that consumers were more likely to purchase such products because it wasn't clear that the product placement had been purchased.

Despite such setbacks, Baidu continues to make gains. It earned $72.2 million in the third quarter last year. Big advertisers include Nike, Intel and other Fortune 500 companies.

It's a reminder that Baidu's mission isn't political or philanthropic: It's a business.

"For ordinary people, the critical information is not keyhole reports of Zhongnanhai," said Baidu's chief product designer Sun, in his blog post last week, referring to the compound where China's top leaders live, "but the most routine information in economy, culture and technology fields."

As with the rest of his posting, this observation was also deleted from his blog, but it was reprinted elsewhere.