It seems that Google’s return to China is no longer just a rumour. The news first came out on 1st of August, with China’s government-owned People’s Daily issuing a commentary a week later.

With the news, Baidu’s share price plummeted during the week.

The week after Google’s rumours

With the exponential growth of mobile internet in China, Alibaba & Tencent have encroached, if not occupied, most of the use cases and consumer traffic gateways, effectively establishing their own ecosystems. Baidu, the other player in the BAT trio, is falling far behind.

That said, Baidu is still the biggest search engine in the Chinese speaking world. Years of easy money from search has made Baidu a rich company, and of course Robin Li, the founder of Baidu, would not like to see Google’s return.

In a tweet, he said he is confident that Baidu will beat Google once again, should the latter decide to return to China.

Robin’s confidence

Well, leaving the prospects of the potential fight in China aside, Baidu has actually tried to fight against Google, outside China.

It was, in fact, one of the first big Chinese internet companies to extensively develop international markets.

However, the results are not rosy.

2006: Google entered China; Baidu went to Japan

Let’s first briefly go through the history of Baidu in China:

In 2000 it officially launched the Chinese language search engine, and gradually offered search services to the major Chinese language portals; a year later, Baidu launched bidding for search results; and in 2005, Baidu IPO’ed at Nasdaq.

In 2006, Baidu faced a big threat: Google’s entry into China. Within 3 years, Google took ⅓ of market share in China.

Facing the real competitor, Baidu launched its international business, trying to fight against Google in other battlefields.

The strategy went: the first market had to be big with huge monetization capabilities. They chose Japan – geographically close to China, and economically robust.

Baidu’s Japan subsidiary was set up in 2007. The company not only made huge investment in equipment and technology, but also secured a star team: Nobuyuki Idei, former Chairman of Sony, became independent director, while Toshikazu Inoue, who used to head Yahoo Japan’s search business, became Baidu Japan’s President.

Toshikazu Inoue

The results are nowhere close to expectations. Google & Yahoo already occupied more than 90% of the search market share in Japan; Baidu’s efforts only landed itself a tiny and stagnant market share of 1%.

In 2015, Baidu shut the seven-year-old Japanese language search engine in silence, only to be noticed by media a few months later. That was telling about the service’s irrelevance.

We at Momentum Works believe the following mistakes were made:

  1. Timing: when Baidu decided to enter Japan, Google was already there – to challenge the status quo, Baidu faced an uphill challenge;
  2. Strategy: Baidu copied its strategy from its success in China, with browser, input method, and directory service hao123 to acquire and retain users. However, the ecosystem in Japan was quite different. Baidu’s other products, such as map, are very similar to what Google was offering, only inferior at that time. Efforts to impose Simeji input effort received backlash from the government, tarnishing the reputation of Baidu in the Japanese market.
  3. Uniqueness of Japanese market: Baidu failed to bring any real innovation to lure the Japanese consumers, which by itself was no small task. Domestic companies did not manage that either.
  4. Partnerships: Baidu actually had some good talks with some telcos, but because of indecision at the top, it missed the opportunity of working with some major players to quickly gain market share. Robin Li also rejected a collaboration possibility with Softbank.

2012-2014: emerging world

In 2012, Hu Yong, a former executive of Huawei with extensive experience in international markets, joined Baidu to lead its international efforts.

Hu Yong

The failure in Japan prompted the company to reflect on its strategy, and adjust its directions on two fronts:

  1. In target geographies, Baidu abandoned the developed world, but focused on emerging markets, setting up offices in Vietnam, Thailand, Indonesia, Brazil and Egypt.
  2. In product offering, it focused on utility tools rather than search engine.
Baidu everywhere

Baidu has thus developed a matrix of products, from directory to browser, from speed booster and battery saver to app store.

Such products are good in attracting a large instalment base, which allowed Baidu to monetize through advertising. In 2010, international business was 0.2% of Baidu’s overall revenue; the international revenue shot up by 16 times, although still less than 1% of the total revenue.

By that time, Cheetah Mobile, Apus and ShareIT were all aggressively expanding outside China through matrices of utility products. Baidu’s edge became slim.

A fundamental problem here is: the online/mobile ad market in emerging markets is tiny compared to that of China. In addition, Facebook, Google and Twitter already captured majority of the good quality advertising dollars. Therefore, such revenue, while good enough for an independent company (Apus became profitable), for companies of Baidu’s size it is really insignificant.

You can imagine how much attention and priority the international business would get, compared to other, profit-making BUs.


Here we have to emphasise on Brazil, a major market Hu Yong had led when he was at Huawei. It became one of Baidu’s major markets for investment as well.

In 2013, Baidu started offering both desktop and mobile applications in Brazil. It launched a Portuguese language search engine a year later.

Later, in line with the company’s overall strategy of prioritising O2O through its Nuomi subsidiary, Baidu bought group buy company Peixe Urbano. The core management of Peixe Urbano exchanged notes extensively with Nuomi team.

In O2O we trust

Baidu expected, with 2.5 million users of Peixe Urbano, the company will get a strong foothold in Brazil, and expand into many other service areas.

To further this agenda, Baidu started an O2O alliance in Brazil, and promised major investments into the sector.

Brazilian entrepreneurs expecting Baidu’s investment

However, the small size and consistent losses of Peixe Urbano pushed the subsidiary into limbo. Nuomi did not want to take over, and later Peixe Urbano was divested to Mountain Nazca, which also purchased Groupon’s businesses in the region.

The O2O entrepreneurs did not Baidu’s promised investments materialize. It never did.


In 2018, Baidu closed its operations in Brazil.

Other regions

Baidu’s businesses in other regions did not fare better. In Southeast Asia, for a long time the senior executive had no confirmation from the headquarters about which initiative to really invest in; executives in Middle East saw one deal after another passing by, without the mandate and support to seize them.

In October 2017, Baidu’s Egypt office was shut down; and its Indian promises never came to light.

In May this year, Baidu announced that it would restructure its international business, focusing on AI technology and its core AI products, including DuerOS and Apollo autonomous driving platform.

This is an acknowledgement that previous efforts completely failed.

What was the cause?

More than a decade of international efforts went nowhere – we believe that the causes include the inherent challenges of Chinese companies venturing overseas, as well as issues particular to Baidu.


When you go to another market, you need talent to be able to execute in that market but also work well with your home team. In its early days, Baidu mainly sent tech and product folks to explore international markets, which was a major mistake.

In comparison, Huawei’s frontlines are filled with Business Development, Sales and Operations people. More crucially, they were given the liberty to make decisions on the go, as long as these decisions are within some predetermined limits.

Could Baidu have copied Huawei’s model? Well, not exactly. Huawei sold products, and Baidu internet services to consumers. Huawei’s handset business is less successful than its telco and equipment business.

There are a lot of lessons to be learnt. Alibaba and Tencent faced the same challenges – though Alibaba is learning. Now it is finally willing to send people, young executives or part of the founding team, overseas – and get them to learn fast. Whereas Baidu and Tencent’s senior executives show lack of willingness to get involved in the small and insignificant global markets.


Baidu’s strategy in international markets has never been firm – it is, at best, wobbly.

Part of the management believed that the international development should be achieved through M&A as well as investment. However, the integration was not as easy as one would normally imagine. So the strategy swang between more investment and more own products – a lot of effort was spent making adjustments, rather than developing the business.

We heard that many governments in emerging markets were actually impressed by Baidu in the beginning and were willing to fund or help Baidu’s efforts in their respective markets. However, for whatever reason such deals did not eventually materialize.

Without clear direction, Baidu’s presence eventually reduced to sales people going to other internet companies: “Do you want to buy users?”

Only Chinese companies understood what they meant. Local startups are more familiar with advertising through Google and Facebook.

Is it too late?

Lots of Momentum Works’s friends actually worked at Baidu’s international business during its heyday. When we chatted about their experience, the common response is a sigh: “we could have succeeded”. Some would also say “developing international markets is much much harder than we imagined, especially for big companies.”

Regardless, Baidu is still a big company with strong cash flows and more important, really good tech. It still has a chance of doing international markets well.

However, to achieve that, it needs a new structure, where motivated and capable people are given enough liberty and resources.

It could invest in its experienced executives, whoever willing to start up new companies in the international markets.

We think not only Baidu, other Chinese companies such as Pinduoduo and Toutiao could do the same.


This article was originally published in Chinese through Momentum Works’s WeChat official account.

In addition to The Low Down, Momentum Works’s Chinese articles are well read by key investment decision makers in tech.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].