Google Takes Stake In Baidu; Positions For Battle
With Yahoo! In China
Google has taken a minority investment position in Baidu,
a Chinese player in the keyword advertising market. Up
until now, Google has had trouble penetrating the Chinese
market because of Chinese government regulations of the
media content market. The exact terms and amount of the
investment were not disclosed.
Baidu would be Google's first announced investment in
the Chinese market. While Google is popular among Chinese
users, and is established as a brand with urban users,
it does not have an official presence in China. Google
does not have any sales presence in China, even though
it offers Chinese keywords for bidding on its website.
Google makes money through its Adwords service, which
allows bidders to bid on keywords in a live auction system.
The paid search results show up in boxes on the right
side of the search results page. Advertisers are only
charged per click-through to their website, not for impressions.
The program has been especially popular with small businesses,
who can create keyword campaigns quickly, and monitor
their effectiveness live in real-time. Since Google launched
its service, the business model has been very successful,
earning the company more than US$972 million in revenue
in 2003.
Google has a similar program for content publishers on
the Internet called Adsense. Adsense pays publishers a
fee per click generated for ads hosted on their content
pages. Ads are targeted accorded to keywords found on
the page.
Examples of Adsense-targeted ad can be found at the bottom
of this page.
Unlike Google, Yahoo! mixes in its paid inclusion with
its search results. The result is that it is often difficult
to separate advertised results from unadvertised results
in search results pages.
The Chinese market is seen by the major Internet players
as the next great frontier for keyword advertising. Yahoo!
has already moved aggressively into China with its purchase
of 3721 in 2003.
In the past year, the Chinese government has tightened
content monitoring on websites. This is the main impediment
to development of the market. By buying a Chinese company,
Yahoo! has shown that it is willing to use a home-grown
Chinese solution.
Google's stake in Baidu also suggests that it has come
around to the position that a local solution may be the
best way to establish a profitable presence in China.
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