Baidu Dreams of Brazil 百度试水巴西

By newsdoug on February 16, 2012

Baidu looks to Brazil After questioning most of Internet search leader Baidu’s (Nasdaq: BIDU) recent net initiatives as misguided, I’m happy to say it’s finally making a new and potentially promising move by exploring an expansion into Brazil. (Chinese article) Such a move looks particularly smart as it would leverage both Baidu’s experience in online search as well as its expertise in making products for developing markets specialist that often have many different characteristics from larger developed markets in the west. Media are reporting that Baidu is preparing to set up an office in Sao Paulo, Brazil’s largest city, with plans to enter the market by first launching an online encyclopedia similar to Wikipedia. While there are still no concrete plans for roll-out of a Brazilian search service, I would expect to see such a product probably within the next year as Baidu gets a better feel for the market. Followers of Baidu will know that the company took its first steps outside China several years ago with the launch of a search service in Japan. That initiative has been a failure to date, with the service only ranking around 800th in the Japanese market despite several years of operation. Largely as a result of the Japan debacle, Baidu’s overseas initiatives have lost around $100 million from 2008 to 2010. I’m still not sure why Baidu chose Japan for its first overseas step, as the market is already notoriously difficult for foreign companies and represents a highly developed and competitive Internet market where Baidu has little or no advantage, especially over homegrown players. By comparison, Brazil shares many characteristics with China, as both are BRICS countries that are have all seen rapid development over the last 5 years. While Baidu may not know much about Portuguese, Brazil’s native language, it certainly understands behavior patterns for advertising in this kind of a market based on its own success in China. It should be able to leverage that experience to boost its chances of success in the market, much the way that Chinese PC leader Lenovo (HKEx: 992) has found success in the last 2 years by re-focusing on its expertise in emerging markets. If Baidu can develop strong search algorithms for Portuguese, which should be possible with the right local talent, I would give this initiative a good chance of success, providing the company with a potential springboard to some of the other BRICS countries as it seeks to expand outside its home China market.

Bottom line: Baidu’s new move into Brazil looks like a smart move with good chances of success, leveraging on its expertise in both search and developing markets.

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