The Documentary “The Baidu Billionaire: Inside the Google of China” features Robin Li, CEO and cofounder of Baidu Inc., explaining Baidu’s success and lack of interest in expanding to other countries. Robin Li, who studied Information Technology in Peking University, believes that “China is a big market and it takes a long time to expand globally.” Even though search engines are at the mercy of censorship and strict government policies, it is still a very profitable sector that people rely on. With a net worth of $12 billon, Robin Li sets aside the possibility of entering the international market and focuses only on the Chinese market.
Moreover, he also explains one of the reasons behind Google’s retreat from China and why successful companies like Facebook are not able to enter the Chinese market. According to Li the main entry barrier is culture. Foreign companies fail to offer services or products that are “Chinese specific.” iPhones, for instance, have small screens and do not allow the customers to upload some applications that are very popular in China. Additionally, there are already established companies that offer similar services or products and are well experienced with the Chinese culture and inclinations.
The incumbent factor is large – Google faced the challenge of localization (some technical, some adapting to local market idiosyncracies). In Baidu they also faced a well-entrenched incumbent. As long as censorship keeps the Chinese market segmented from the rest of the world both can coexist. However, it seems unrealistic to think that Baidu could expand outside of China by gradually building up a user and advertiser base – the former would be costly, and the latter only follows later (if at all). But if artificial barriers were lowered, are Chinese users so wedded to features unique to Baidu that Google would be unable to enter? My guess is “yes,” that Google would find it very expensive to develop the options to which Chinese users are now accustomed.
Indeed, I would predict that Baidu has focused efforts disproportionate to their profitability on developing tools and features not well-entrenched outside China in an attempt to differentiate themselves from the 800 Gorilla not yet in the room.
Finally, what jargon should we use. Is this “culture”? Or simply the weight of history? or [deliberately] differentiated products in markets where not all goods are identical, an F-150 vs a Silverado vs a RAM story?
Baidu may be wise not to try and expand into other countries. It is very difficult to bridge the cultural gap into other countries. Of course it is easy to agree with the CEO who has looked at and analyzed all of the relevant information, but it is also important to think about improving the site in China so that it keeps being dominant. There are competitors trying to gain market share, and allocating a large part of the budget into developing a site for other countries may take away from money spent to continue to improve the site in China.