Last month Baidu, the dominant search engine in China, announced they launched a Portuguese version of their search engine in Brazil. (You might notice they have opted for a subdomain on their .COM, instead of the .COM.BR Brazilian TLD that Google uses, but that’s for another post.)
Brazil might seem like an odd first expansion choice for a search engine that is primarily focused on the Chinese language, but when you dig into the details, it actually quite logical.
For those unfamiliar with Baidu, their algorithm is similar to other search engines in that it calculates a web document’s relevance to a query by using a set of on-page and off-page factors. However, the quality of results is not the same as you might see on Google.
The reason for the lower quality is that Baidu’s algorithm gives far more weight to easy to game factors like keyword density and low quality links, whereas Google is a bit more sophisticated in determining relevancy. Additionally, Baidu has a much smaller index due to their weaker crawling capabilities. As a result, anyone optimizing for Baidu knows that submitting a sitemap to Baidu’s Webmaster Tools is critical to facilitate efficient discovery of their site.
Some of the weakness in the algorithm could be explained by a lack of competition, which meant Baidu had little motivation to innovate and constantly improve search quality. Google’s departure from China in 2010 was quite beneficial for Baidu, and for a couple of years they easily dominated the search market in China.
Everything changed for Baidu in 2012 when Qihoo 360, a software company known for antivirus software, launched it’s own search engine so.com. Surprising many in the Chinese search world, Qihoo quickly zoomed to a 10 percent market share in their first year of business.
Qihoo is currently the second largest search engine in China with 23 percent of the market. Additionally, Baidu competes against Sogou.com a company that just recently merged their search engine with Tencent’s Soso search engine. The combined Sogou market share is 11 percent.
The new competition has steadily driven Baidu’s market share lower over the last two years. While Baidu is still the market leader, they now have just 63 percent market share compared to their 72 percent at the end of 2012.
With their market share taking a beating in its domestic market, it makes a lot of sense that Baidu decided to find some growth in what they perceived to be low hanging fruit outside of China.
While to some it might seem like a fool’s journey to enter the Brazilian market, where Google currently has a 98 percent market share, there actually are a number of reasons why Brazil is the perfect choice for Baidu’s foray into new markets.
- Brazil still has relatively low Internet penetration at only 46 percent, so Baidu’s challenge is less about converting Google users to Baidu users than it is about getting new internet users to start using Baidu. This is the precise challenge that Baidu faces in China where only 42 percent of people are online.
- Just like China, Brazil is also a member of the “BRIC” (Brazil, Russia, India, China) nations, which are countries deemed to be at similar stages of economic development. If Baidu had to choose one country to enter, it would make sense to choose a country that has very similar economic characteristics. Furthermore, out of the other three countries on the BRIC list, Brazil is the only country where Baidu has a chance of competing. Yandex, the Russian homegrown search engine, dominates the Russian search and, as I recently wrote, even Google faces numerous challenges at knocking Yandex out of the top spot. In India, a significant amount of search queries are conducted in English, and Baidu is unlikely to beat Google in the English language search for the near future.
- Aside from economic growth there are other similarities between the two countries such as a large growing middle class and a highly educated workforce. It is logical that Baidu would consider opening a local office with a staff that has a similar makeup to employees in corporate headquarters in Beijing.
- Baidu is a strong mobile company, and their mobile users even outnumber their PC customers. Brazil is on pace to become a mobile first country, if its current mobile connection rates continue, and Baidu might see this as a competitive advantage.
Time will tell if entering Brazil was a wise decision for Baidu, but the real significance behind this expansion is that it shows that Baidu is starting to think and act global. They have already announced that Thai and Arabic are next, and they surely have thoughts on where to go afterwards.
Should Google be worried that they will enter the US market? Probably not right now.
The Baidu algorithm isn’t ready yet for that level of competition, but the recent hire of a deep learning expert from Google could mean that Baidu has every intention on improving quickly. One thing is certain; the next few years will be very interesting in the search market.