Take the site renwu.baidu.com that Baidu released recently as an apt example. The chosen Person of the Month has an influence, big or small, on netizens' everyday life. The first such Person was a young actor named Wang Baoqiang, who starred in a popular TV series in China. When it appeared on Baidu's homepage, his logo was welcomed warmly. Indeed, there is high brand awareness for Baidu among Chinese netizens, when they find the logo of each traditional Chinese festival appearing on its homepage.

Competition

Another reason for Baidu's expansion derives from fierce competition.

Baidu vs. Google: By the end of September, Baidu.com accounted for 69.5 percent in terms of netizens' first choice while Google China only accounted for 23.5 percent, according to a 2007 market research report released by China IntelliConsulting. The comparison is striking, but Google is eager to see success in China, the world's second largest market, through continuous localization.

The future of Baidu, however, seems uncertain and full of risk, compared to ambitious Google. There is a huge profit gap between China-based Baidu and giant Google, not to mention the global market. It is thus understandable that Baidu wants to invest in a larger market such as Japan.

Baidu vs. Alibaba: Competition between Baidu and Alibaba seems inevitable as long as the future directions of the pair overlap.

Alibaba's President Ma Yun is frequently asked about competition with Baidu.

"E-commerce in China is in its initial stages," said Ma, unwilling to comment on this oft-repeated subject.

"Due to the absence of direct competition, there is still a lot of space for development, although the market for online shopping in China is entering its 10th year," said Li Mingyuan, General Manager of Baidu's e-commerce department.

The C2C business of Baidu has been in preparations for almost a year, while the operation platform will be officially released around the middle of next year, according to Li.

The total trade volume of domestic C2C market in 2006, according to statistics, was 25.8 billion yuan ($3.4 billion) and is expect to hit 78.9 billion yuan ($10.2 billion) by 2010. More importantly, only 25.5 percent of 162 million netizens in China use online shopping.

To be more specific, the domestic C2C market loses money continuously; moreover, the sales volume in the domestic C2C market accounts for less than one percent of the whole retail industry. This number, in the United States and South Korea, for instance, is 4 and 12 percent respectively. These, from Li's standpoint, are favorable to Baidu's entry into E-commerce.

Li's opinion is echoed by Zhang Yifen of China Yahoo. According to Zhang, the overlap between Baidu and Alibaba will only be on the increase.

"From a wider perspective, a search engine can be seen as a kind of E-commerce. The strategy of Baidu's entry in the C2C market is reasonable, for it has nurtured a huge amount of customers," she added.

New direction

Some analysts describe Baidu's recent expansion as "finding a new way to profit as well as making investors confident". Judging from the above, however, Baidu's money-earning capabilities will be undermined if the pressure of maintaining its market share increases.

According to its financial report for the third quarter, released by Baidu in October, the total profit was 496 million yuan ($65 million), a 107.5 percent increase from the same period last year; online sales volume accounted for 99.92 percent of the total profit, an increase of 95.72 percent from the second quarter of 2005.

The responses from the industry toward Baidu's profit mode vary, but most of them are optimistic.

According to analysis from iResearch Consulting Group, the first professional market research company in China that focuses on Internet media, e-commerce, etc., Baidu has ensured a profit increase in its core business as well as explored multiple profit modes based on the search engine service. It is clear to see that Baidu has spared no efforts in bridging pageviews with commercial values.

As for the C2C market, the new business arena of Baidu, making money is not the current top priority, according to Li Mingyuan.

"Baidu will probably find a better profit mode in the near future; e-commerce will also contribute to the profits of the search engine," Li added.

According to iResearch, Baidu will focus on the combination of search engine and lifestyle-related information. In other words, it will move from pure search engine towards a combination of e-commerce and online community.

Lv Bowang, an Internet analyst with China IntelliConsulting, said that the "search + community + e-commerce" mode could be a lucrative one for Baidu to follow.