- With a dominant position in the Chinese internet market and after the failure in Japan, Baidu focused on international growth in Southeast Asia, South America and Arab countries.
- After Baidu introduced local site and development office in Brazil, Southeast Asia and Egypt it announced acquisition of the Brazilian local e-commerce site Peixe Urbano.
- Peixe Urbano will allow Baidu to penetrate the e-commerce market and compete with Amazon, eBay and Alibaba in Brazil.
- In the future, Baidu could use the Peixe Urbano platform to grow its e-commerce business globally.
The Chinese internet giant Baidu (NASDAQ:BIDU) is mainly known for its search engine that dominates the Chinese market and for its initiatives in China that include different online services such as cloud storage, anti-virus software, online security, the Baidu Encyclopedia, a web browser, the social service Tieba etc. After dominating the Chinese market in many sectors, the company is trying to grow globally through acquisitions and investments in international R&D sites.
Baidu’s global expansion is focused on mainly emerging markets or markets with considerable growth potential. Baidu failed in its first international attempt in Japan. The Chinese giant launched a local site in Japan in 2008, but it underestimated the strengths of the established players. Baidu’s search engine did not offer any added value for the consolidated Japanese market and could not compete against Yahoo Japan and Google. In 2013, Baidu had a market share so small that it fell into the “others” category that had 7% of the search engine market share in Japan.
After the failure in Japan, Baidu marked Southeast Asia, South America, and the Arab countries for international expansion, but this time it wants to do it differently from the Japan attempt. As the first step to penetrating the Southeast Asian market, Baidu launched local services in Thailand, Vietnam and Indonesia that offer either its search engine (in Thailand) or security and PC services (Vietnam and Indonesia). In 2013, Baidu took its Southeast Asia expansion further and opened a local development center in Jakarta, Indonesia, as part of a long-term move to settle down in the region and create long-term relationships with the local merchants, internet users and governments.
Baidu started its entry into the Arab world by launching a local Arabic site in Egypt and opening a local office there. The latest turmoil and geopolitical unrest in the Middle East prompted Baidu to put its effort in this region on hold until political conditions allow the company to resume its Arab expansion plan.
In July 2014, with the Southeast Asia plan on track and the Arab plan slowed, Baidu entered the South America market by launching a local Portuguese language search engine named Baidu Busca coupled with its social service PostBar. Brazil is the fifth largest internet market in the world and the largest market in South America, with 107 million internet users and 53% internet penetration that is expectedto grow to 59.5% in 2017. Last month, Baidu opened its local development office in Sao Paulo, Brazil, which became the seventh international development center and its local head office in South America. As with the Jakarta office, the Sao Paulo center will also be used to develop long-term relationships with the business community, government, and internet users, which will strengthen the Baidu brand in Brazil. The Brazilian site is currently a success for Baidu with more than 50 million people accessing Baidu’s services every day.
Following the successful entry into the Brazilian internet market, Baidu decided to continue with its expansion plans and acquired a controlling stake in Peixe Urbano. Peixe Urbano is the local equivalent of Groupon in Brazil and the largest group buying site there. Baidu’s acquisition will grant the Chinese internet giant both a bigger share in the Brazilian internet market and the first move into the e-commerce business, which could potentially generate additional revenues.
In the short-term, the acquisition will help to boost Baidu's local operations in Brazil and strengthen the brand there. Baidu could also take advantage of Peixe Urbano's database and expertise to offer better ads based on product search results in the Peixe Urbano site. In the long term, Peixe Urbano's acquisition will help Baidu expand in a country where the e-commerce market is expected to grow an average 18 percent annually by 2016. Baidu could use Peixe Urbano to compete with e-commerce giants like Amazon, eBay, or Alibaba in Brazil and could later leverage Peixe Urbano’s experience in the e-commerce market to expand that service outside of Brazil.
After Baidu took over the Chinese internet market, the company tried to expand globally and look for new geographies and businesses from which to generate revenue. Baidu marked Southeast Asia, South America, and the Arab world as preferred regions in which to grow. Even though Baidu’s expansion into the Arabic-speaking world was halted by the geopolitical unrest in the Middle East, the South American and Southeast Asian expansions were successful. In Brazil, Baidu took another step in its global expansion and acquired a controlling stake in the Brazilian leading e-commerce site Peixe Urbano. The expansion can be translated into a larger global footprint, additional revenues from its core business, and new revenues from e-commerce that could drive Baidu’s stock higher in the long term.
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