Baidu.com Advertising business --going to EU with V2Future

Baidu.com Advertising business

--going to EU with V2Future

By: Ning Liu

Student Number: 10415238

Thesis Supervisor: Prof. Dr. John B Cullen

Course: 2013-2014 MBA Fulltime

Amsterdam Business School

University of Amsterdam

Index

Executive Summary ..................................................................................................... 3

Internet marketing/E-commerce ..................................................................... 5

Introduction of Baidu and V2Future ........................................................... 7

Literature Review ............................................................................................................ 8

V2Future with Baidu：A Successful Step ........................................ 12

V2Future’s future growth after cooperating with Baidu ........ 18

Baidu’s Internationalization for EU .............................................................. 22

Study Summary ............................................................................................................. 31

List of References ........................................................................................................... 32

Executive Summary The paper analyzes Baidu.com SEM advertisement sales business out of

China. Baidu.com is the giant in China Internet Market and is regarded as the

“Chinese Google”. However the strongest business for Baidu is their Chinese

language based search engine, which means they are very strong but only

strong in Chinese market. The problem Baidu is facing is how to define their

internationalization strategy.

There are 2 approaches for Baidu to develop their international business.

1. Trying to attract foreign companies who wants to focus on Chinese

consumers, to invest ads promotion in Baidu’s Chinese website

2. Trying to set up offices overseas and build local website in the local

markets, so that Baidu has the capability to compete with their local

competitors (Google or anyone else)

At the moment Baidu is actually taking the both way. On one hand they start to

expand their business to attract customers out of China through overseas

agencies; on the other hand Baidu is also starting to be prepared to compete

their competitors out of China.

Through this paper, I will provide the background information introduction on

the online marketing/e－commerce status in both European market and

Chinese market, and the comparison of the similarity and difference in both of

the markets. My company project studies outcome will help to analyze how

Baidu should overcome the international investment barriers by providing

framework through various strategy formulation principles, strategy theories,

and strategy frameworks. The paper will also give an insight on which market

Baidu should start to compete globally from the data that the company project

provided and how V2Future should develop the internet related business

Internet marketing/E-commerce

Online Marketing was not as fancy as it is even back to 5 years ago. Now

everywhere on internet you can find the signs of online marketing. A pre-roll

before a YouTube video, a pop-up ads in your browser, an ads link in your

mobile app, or, most commonly, a promotion link in Google when you try to

search something.

The fast development of online marketing is because of the fast development

of E-commerce.

At the moment, E-commerce in China is developing even faster than that in

Europe, as well as the rest of the world.

(Source: V2Future internal document—The Short Cut from Alps to Great Wall, quoted from McKinsey Global

Institution)

Because of this fast development speed, as well as the great market potential

in China (see the picture below), more and more western companies are now

trying to put their focus in the Chinese market.

(Source: V2Future internal document—The Short Cut from Alps to Great Wall, quoted from McKinsey Global

Institution)

Baidu SEM product is a search engine very similar comparing with Google, but

particularly strong in the Chinese language.

After launching more than 10 years from the year of 2000, Baidu.com has

become the No.1 choice to make investment for online marketing for any

company who wants do business in China.

That is the main reason why Baidu is in belief that now is the good time to sell

their services to overseas customers.

Introduction of Baidu and V2Future

Baidu, Inc. , incorporated on January 18, 2000, is a Chinese web services

company headquartered in the Baidu Campus in Haidian District in Beijing.

Baidu offers many services, including a Chinese language-search engine for

websites, audio files, and images. Baidu offers 57 search and community

services including Baidu Baike (an online collaboratively built encyclopedia)

and a searchable, keyword-based discussion forum. Baidu was established in

2000 by Robin Li and Eric Xu. Both of the co-founders are Chinese nationals

who studied and worked overseas before returning to China. In May 2014,

Baidu ranked 5th overall in the Alexa Internet rankings. During Q4 of 2013, it is

estimated that there were 5 billion search queries in China per day of which

Baidu had a market share of 65.6%. China's Internet-search revenue share in

second quarter 2011 by Baidu is 76%. In December 2007, Baidu became the

first Chinese company to be included in the NASDAQ-100 index.

Baidu provides an index of over 740 million web pages, 80 million images, and

10 million multimedia files. Baidu offers multimedia content

including MP3 music, and movies, and is the first in China to offer Wireless

Application Protocol (WAP) and personal digital assistant (PDA)-based mobile

search.

V2Future B.V. The company project I’m doing is with a Dutch company called

V2Future B.V. Founded by a group of Chinese experts with European

business experiences. Beginning of the year 2014, V2Future signed an official

partnership contract with Baidu.com, became the only official agency in

European area. How to gain the trust from European customers and help them

to understand/adapt to Chinese online marketing is the key to win the

business.

Literature Review

In this paper, the analysis of business will be around 3 topics—International

Business & Competitive Strategy

International Business-

Challenges of international business: CAGE

(Source: Pankaj Ghemawat, (2001) Distance Still Matters, TOOL KIT September, pp.140)

Distance between two countries can manifest itself along four basic

dimensions: culture, administrative, geographic, and economic. The types of

distance influence businesses in different ways. (Pankaj Ghemawat, Distance

Still Matters, 2001)

FDI, the OLI advantage—

(Source: ABS MBA International Business 2013-2014 course material by Alan Muller)

Competitive Strategy

Business Portfolio—the BCG model

(Source: Barry Hedley, (1977) Strategy and the “Business Portfolio”, Long Range Planning February, pp 193-195)

Individual businesses can have very different financial characteristics and face

different strategic options depending on how they are placed in terms of

growth and relative competitive position. Business can basically fall into any

one of the four broad strategic categories.

(Barry Hedley, Strategy and the “Business Portfolio”, 1977 )

Porter’s “Five forces”

(Source: Michael.E.Porter, (1979) The Five Competitive Forces That Shape Strategy, Harvard Business Review

March-April)

Porter five forces analysis is a framework to analyse level of competition within

an industry and business strategydevelopment. X`

(Michael.E.Porter, The Five Competitive Forces That Shape Strategy)

Resouce-based view

The history of strategic management research can be understood as an

attempt to “fill in the blanks” created by the SWOT framework. However the

SWOT framework tells us that environmental analysis—no matter how

rigorous—is only half the story. A complete understanding of sources of

competitive advantage requires the analysis of a firm’s internal strengths and

weaknesses as well.

In general, when a firm’s resources and capabilities are valuable, rare, and

socially complex, those resources are likely to be sources of sustained

competitive advantage.

(Jay B.Barney, Look Inside for Competitive Advantage, 1995)

V2Future with Baidu：A Successful Step

When it was founded, V2Future positioned itself as a bridge/portal between

China and Europe, providing business consultancy to companies, those who

want to invest in EU market from China as well as those who want to invest in

Chinese market from EU.

From the analysis of competitive strategy, the result convinced me that

V2Future would be successful in selling a Chinese search engine to Western

world? Their competitive advantage will definitely help!

From the RBV by Barney, V2Future has a lot of resources, which are the keys

of their future success.

The HR resources of V2Future is their most important advantage doing Baidu

business, all the consultants of V2Future are Chinese experts who have been

working in Europe for more than 5 years. They are with Chinese background

and culture, and understand the way that European companies do business.

While search engine is some product that with strong relation to the language

and the culture, there are not too many competitors have a group of people like

V2Future do.

The company’s location. V2Future is selling Baidu services, however

comparing most of it’s competitors, V2Future is the only one which is located in

Europe. The customers will have less communication/time difference issue

with V2Future than with other companies. At the mean time, located in EU

means V2Future is also fitting with the European law instead of Chinese law,

which is most of the time the case for other Baidu Agencis. So V2Future gets

the location advantage in FDI mode comparing to it’s Chinese competitors.

The relationship with Baidu is the other crucial point. The CEO of V2Future

has a great personal relationship with the MD of Baidu international business

unit. This is one of the reason one V2Future became the first official oversea

agency of Baidu, also the only one in Europe. It’s like an unwritten exclusive

deal for V2Future to do the Baidu business, which almost means that V2Future

has no competitor in the market for their Baidu business.

Technical capability is the other point that V2Future is different comparing

other competitors. V2Future has a technical team in China in charge of the

delivery of the services which they sell to the customers in Europe. This is very

rare if we look at other online marketing agencies of Baidu. This team will take

care the customer’s account opening, SEM campaign management, report

providing as well as some other value added services, eg. Hosting customer’s

Chinese landing page, landing p

Also the product of Baidu for Chinese market is unique to the European

clients.

(Source: Baidu internal document – Baidu international business intro media kit 2013)

From the picture above we can see that Baidu occupied nearly 80% of the

Chinese search engine market, regardless the rest market are mostly shared

by the competitors with a preinstalled/bundled deal with the hardware vendors.

In other words, if a company wants to do business in China and needs online

marketing, Baidu is the first choice and Baidu search engine is almost the only

choice for SEM.

All of the resources mentioned above (HR, location, Baidu relationship as well

as the Baidu product/services) are valuable, rare and socially complex for

competitors to imitate, so they are the basic elements to ensure the

competitive advantage of V2Future for Baidu business and their long term

success.

From Porter’s five forces theory, we can also see the obvious advantage of

V2Future in the business. As mentioned above, Baidu is dominating the

Chinese search engine market, which makes V2Future can be very aggressive

in front of it’s customers. So the bargaining power of the buyers is low; among

the existing competitors, it’s very difficult for them to compete because

V2Future has experience in Europe, and more importantly, located in Europe,

most of the existing competitors are in China, very few of them are in the

southeast Asia or America, none in Europe, which means the Rivalry of the

existing vendors is low; the good relation with Baidu and the unique HR

advantage makes the threat of the new entrants is low; and because of the big

market share in China, as well as the high cost efficiency rate of internet

marketing comparing with the traditional media tools (TV, radio, magazines.

Etc. ), the threat of substitute products or services is low as well. However,

because of the high dependency on Baidu product and services, the

bargaining power of Baidu in front of V2Future is high, this is the only potential

risk according to Porter’s theory.

From BCG model, we can definitely attribute Baidu business as the star

product for V2Future to sell. It’s new, marketing is growing so fast, no real

competition in the market, V2Future just need to focus to think how to quickly

gain profit out of the business, and once it attract customers’ investment, the

investment would not stop and be continues. With the successful cases and

reputation, it’s just a question of time that when this Star product will turn into a

Cash Cow.

Even with all the competitive advantage explained above, we can make sure

that V2Future is an agency with enough quality to sell Baidu business outside

China; however, how can we make sure that Baidu ads in China is attractive

enough for the foreign companies who wants to do business in China? For this

topic, we have to go back to the Chinese internet environment.

If we look at the picture below, we can see that if a company goes to China, it

will absolutely need more local help than they need normally when the

investment happens in the other countries.

(Source: V2Future internal document—The Short Cut from Alps to Great Wall)

As we know that Google/Youtube/Facebok/Twitter, normally the most popular

network platforms, are forbidden the accessibility from China by the Chinese

government. This is partially because of the political reason, also due to the

local protection of the internet industry in China.

So we can see that youku.com is the replacement of youtube.com in China;

Renren.com is the replacement of facebook.com; Weibo.com is the

replacement of twitter.com in China and Baidu.com is the replacement of

Google.com in China.

Most of the current European customers are not so familiar with the Chinese

internet environment, V2Future together with Baidu need to educate them to

let them realize how important the product and service V2Future is providing

for their Chinese business.

What V2Future needs to keep on doing is build relationship with other

companies like they have done with Baidu, so they can provide one-stop-shop

as the “Chinese Internet Solution Provider” to their European customers.

V2Future’s future growth after cooperating with Baidu

V2Future has a very nice start of their business to cooperate with Baidu.

However, during the business communication with their existing customers

they still find some difficulty of selling their services to match all customers’

requirement. This will prevent the long-term ambitious growth of V2Future,

what V2Future should do to transfer their current competitive advantage into

their sustainable growth?

As we mentioned, the business of Baidu is dominating in the search engine

market. However, there are a lot of other platforms in China to form the how

eco system of Chinese internet environment.

Here mentioned above are the biggest ones, especially Weibo.com (Chinese

twitter) and Wechat (Chinese facebook + whatsapp). A lot of customers want

to do online promotions other than Baidu.com SEM. Weibo and Wechat are

the other 2 choices among the many.Also, Youku.com can be as the Youtube

in China, taobao/Alibaba is the Chinese Ebay. With all these options, V2Future

should trace closely and try to build close connections with the companies

mentioned above. So that V2Future can offer a bundle of services for their

customer to enter Chinese online marketing with choices among Baidu,

Wechat, Weibo, Youku as well as Alibaba.

Moreover, the latest trend for internet marketing is to go to mobile internet.

Apple and Adroid are the top 2 platform for mobile internet marketing; however,

the platform of Android is a bit mass in China (again because of Google is

officially not in China). V2Future should build proper partnership with certain

online marketing experts in the domain of mobile internet so that they can

provide end to end services to their customers in Europe.

Currently, V2Future can only offer customer one single solution that’s

Baidu.com

With the analysis above, V2Future should develop itself into a company who

can provide multi solutions to enable their European customers touch Chinese

online marketing platform, ideally as below

In this sense, on one hand V2Future can match the different request from the

customers, on the other hand it will strengthen their bargaining power in front

of their current supplier — Baidu because of the other choices they will have.

This will create a lot more opportunities and to support their sustainable

competitive advantage in the market.

This business model of V2Future can help a lot for it’s customers to avoid risks

of the 3 key issues on FDI—Trade, EU companies can adjust the trading

strategy and execute right away because everything is on internet; Exchange

Rate, with the service of V2Future, the exchange rate is real time (or at longest

2 weeks time) and taking the EU/China economical/political environment into

consideration, the risk is relatively low; Investment, the investment on internet

services is much smaller than opening an entity in a foreign country.

Also, this model helps the EU companies minimize the negative influence of

distances which defined in the “Cage: Distance Framework”. The influence of

culture distance is one of the important to be noticed, the different languages

and ethnicities might cause some problem; the influence of administrative

distance can be overcomed by the nature of the company—a small bunch of

Chinese professionals with EU experiences they can take care of the

weakness brought by politic/government/institution and sometimes even turn it

into competitive advantages; geographic distance is easily to be taken out of

consideration because it is internet business, time zone matters more in this

case; economical distance is also important for the executive of the company,

because the cost in EU will definitely be much higher than in China in

each/every way. So in General, V2Fuutre needs to focus the influences more

on Culture/Economical Distance.

As long as V2Future can keep their pace with the Chinese internet tech

development and help their EU customers adapt their actions/advertisement

more fitting the Chinese consumers’ tastes, V2Future will keep gaining

success out of this strategy.

The last question here is—

China is such a big and attractive market and Baidu is so strong, why do they

need V2Future? The reasons are as below observed.

1. Baidu’s resources are not ready to attract customers to China from all over

the world. They don’t have experts who have enough knowledge and

experience to deal with overseas customers. A ridiculous case is – An

Italian customer tried to contact Baidu from mid 2013 to invest on Baidu

SEM, however till mid 2014, after 12 months, they still cannot open their

Baidu Account to start with their SEM campaign in China.

2. The IT system is not ready for overseas customers. Baidu is a huge

company in the Internet domain even we look from a global point of view.

However in such a big company, every single IT system are only in the

language of Chinese. To switch all these systems into English would be a

large project which will cost a lot time, money and resources. Baidu doesn’t

want to do so when they didn’t get enough benefit from the overseas

market and not sure if it’s worthy for them to do. More importantly, the

Chinese market is already big enough and they are dominating. Without

competitors with enough quality bringing enough threats, they don’t have

motivation to invest for the improvement.

3. Almost all the customers are investing in Baidu through agencies, however,

the currently agencies of Baidu are all located in China, they don’t have

qualification to deal with international neither.

So, the fastest and most cost-efficient way of Baidu for the short period to

attract overseas customers is that they should focus more to find partners like

V2Future, which is with good service quality and does not cost Baidu too much

resource.

And, for Baidu, V2Future’s experience can be easily copied with Baidu’s other

partners in other regions all over the world.

Baidu’s Internationalization for EU

From Baidu’s perspective, cooperating with V2Future is only for attracting EU

companies to invest in Baidu China. The potential market is huge and the road

is long. Baidu should first find more partners like V2Future in different regions

all over the world, so that the sales network can be spread fast; then build

strong supportive system to the oversea customers (currently the resource in

this part is very small comparing with Google)

Baidu’s steps to go to EU—How to do FDI?

Baidu’s internationalization strategy is not mainly focusing on attracting foreign

companies to invest in their Chinese search engine, instead, they want to step

out of China and compete with Google or other competitors in other markets

step by step.

This is what Baidu doing-- they set their office in Indonesia, Thailand and

Brazil, where the countries with huge population but no-English speaking, and

created local sites in those countries;

But Baidu understands that this could not be the way how they should expand

in EU market because Google is too strong in these markets.

The problem with the act of searching in China has more to do with the

language than with search technology. In English or most of the EU languages,

we know that there is a difference between “My Mom is good.” vs “My Mom is

great.” A search engine tries to understand the intent and can usually do an

adequate job in interpreting that intent and providing the results.

It’s not perfect, but because we are a pretty forgiving language, we figure it out

pretty easily. But what if in English, we had 15 different words for “Mom” and

most of those we never heard of because they are spoken in different areas of

the country? Now add 15 different variations of “good” and “great”. A simple

phrase can quickly turn into hundreds of different interpretations and therefore

hundreds of very different search results. The written Chinese language

doesn’t have “standards”. This is one of the reasons why Chinese websites

have so many links in it and so many sites have numbers in them…makes

things a hell of a lot easier to traverse.

So these are the 2 potential ways where Baidu can get into EU market with

success—

1. Going Mobile

In China, 47.5 percent of web traffic is mobile, compared to just 34 percent in

Europe. With Google struggling to gain its footing in China, Baidu is stepping

up to take the position of number one search engine in Asia.

(Source: Michael Bonfils, Why Baidu’s International Mobile Strategy Will Change Everything, 2015)

Partnering with international startups, wifi providers, mobile device makers,

and luxury carmakers – Baidu’s strategy is to widen its know-how and potential

market reach without investing in in-house innovation, unlike Google. In the

race with BAT, Baidu is innovating like the Chinese do – investing in startups to

spark creativity.

Going to Baidu chairman Robin Li’s comment, Baidu sees the potential for

mobile and is building its business on serving the mobile consumer across

education, financial, traveling, and health spheres. By investing in these

verticals Baidu is boosting its brand image and value.

But with Google making 95 percent of its revenue from advertising and Baidu

only 50 percent, Baidu’s investments in startups will help to spread out its

revenue model. If Google is the world’s dominant search engine, then Baidu is

on its way to be the Asian world’s mobile search provider.

It is true that Baidu cannot (yet) compete with Google directly in the PC end

Search engine market, but considering the popularity and maturity level of

Mobile internet in China, we have enough reason to trust Baidu can survive in

EU market with their mobile end product & solutions

2. Focusing on Tourism related industries

The development of travel flow in the last few years reveals China’s immense

pent-up demand for travelling and a growing desire to travel to foreign holiday

destinations. As a result of economic recovery, but also due to the travel

facilitations and social change, Chinese outbound tourism1 is expanding

significantly. The number of holiday flights alone has increased in the last six

years by 50% from 11.3 million to 17 million in the year 2011. In 2011, a total of

39.2 million Chinese travelled out of the country – approximately 14 million

more than in 2006. The figures are, however, to be viewed with caution since

around 72% of these trips were to neighboring countries Hong Kong and

Macau. By 2020, experts anticipate further growth in Chinese outbound

tourism of around 17% annually. For 2013, Euromonitor already anticipates

more than 49 million people travelling abroad, which will make China one of

the largest source markets in the world.

(Source: Travel in China http://www.euromonitor.com/travel-in-china/report)

In an international comparison, Europe currently takes first place on the

Chinese traveler’s list of preferred destinations. Chinese tourists in Europe

have steadily increased in numbers in the last few years, with the exception of

the credit crunch years 2008 and 2009. According to official data by the

Chinese tourism office, CNTA, just over two million Chinese visited European

destinations in 2009. Just one year later 2.335 million visits were registered, an

increase of 14.7% within a year. Due to the statistical quirk that travellers

entering Europe via Hong Kong or Singapore are not registered, many experts

suspect that the number of Chinese tourists travelling to Europe is

considerably higher in reality. A survey by IPK International on behalf of ITB

Berlin drew the conclusion that about 3.8 million Chinese actually came to

Europe in 2010. France and Germany are the most popular vacation

destinations within Europe. In future, the Chinese will make an even bigger

mark on Europe’s tourist hotspots – such as the Eiffel Tower or Castle

Neuschwanstein – than they do today. The World Tourism Organization

expects that, in 2020, a quarter of all tourists visiting Europe from Asia will

come from China. If one follows the forecast of the School of Oriental and

African Studies at the University of London, there will be more than 8.5 million

Chinese tourists holidaying between the Algarve and the Ural Mountains.

Other destinations such as the United States, South Korea, Japan and

Malaysia have caught up at an aboveaverage rate in the past few years.

Between 2004 and 2009, the growth rate on the US market was 158.6%. In

comparison, the number of overnight stays in Germany increased by a

relatively low 12.4%.

(Source: China National Tourism Administration (http://en.cnta.gov.cn/))

(Source: Baidu internal document—Baidu Travel Annual Review 2013, quoted from ETC)

With all the figures above, we can see Europe becomes a bigger and bigger

market for Chinese tourists and this market will keep on growing in the

foreseen future.

Baidu with its relative products like Baidu search engine, especially Baidu

Travel (travel.baidu.com) is ideally providing the platforms for those travelers

from China to grab tourism information for their EU destinations, and for EU

travel section merchants to put their Ads to attract more Chinese travelers.

3. Acquisition

To step into foreign business, acquisition is one of the most direct entry mode.

Regarding the shortcomings of traditional acquisition for FDI, acquisition of

internet companies’ risk is lower. The reason here is the operation of internet

company needs to match the local market environment much more than the

traditional companies, so normally after a successful acquisition, the company

which is acquired will not have a very big change in the company cultures.

Thus it will behave without too much differences comparing it was before, they

mainly need to adapter mother company’s technology practices.

Baidu Acquisition case with Taboola

Taboola is the leading discovery platform, serving over 200 billion

recommendations to over 550 million unique visitors every month on some of

the Web’s most innovative publisher sites, including USA TODAY, Business

Insider, NBC News, Chicago Tribune, and The Weather Channel.

Headquartered in New York City, Taboola also has offices in Pasadena,

London, Tel Aviv, New Delhi, and Bangkok. Publishers, marketers, and

agencies leverage Taboola to retain users on their sites, monetize their traffic,

and distribute their content to drive high-quality audiences.

In May 2015 - Taboola announced a multi-million dollar strategic investment

partnership with Baidu Inc., the leading Chinese language Internet search

provider. The partnership brings together two cutting-edge technology

companies that are re-defining the "search" and "discovery" categories across

the world's biggest markets. Together, Taboola and Baidu plan to bring

discovery to the Chinese market, wheremobile is the number one way people

go online.

The investment from Baidu is a follow-on to the $117 million Series E round of

financing announced by Taboola this past February, and represents another

significant vote of confidence in Taboola and the future of content discovery.

Baidu ranks as the top website in China, and fourth most popular in the world

(according to global traffic ranking firm Alexa), receiving tens of billions of

search queries every day, about 75 percent of China’s combined PC and

mobile search market share.

Taboola has experienced massive growth since its inception in 2007, rising

from less than $10 million annual revenue in 2012 to over $200 million in 2014.

The Series E round in February was led by Fidelity Management and

Research Company, and included existing investors Marker LLC and

Steadfast Capital, as well as new strategic investors Advance Publications

(parent of Condé Nast and Advance Digital), Comcast Ventures, Mr. Carlo De

Benedetti (chairman of the Gruppo Editoriale L'Espresso), Groupe Arnault (the

controlling shareholder of LVMH), Yahoo! JAPAN, and others.

“Though our roots are in China, Baidu actively seeks out innovative technology

companies abroad to partner and invest with,” said Peter Fang, senior director

of Corporate Development at Baidu. “Taboola’s remarkable vision and growth

over the past few years captured the admiration of our executive team, and

we’re very excited about the potential of the discovery market worldwide.”

Taboola serves more than 200 billion monthly content recommendations to

over 550 million users across some of the Web’s most innovative publisher

sites in the US, UK, France, Germany, Italy, Thailand, India, Japan and Israel.

Media and technology partners around the world have leveraged Taboola’s

technology to launch local initiatives. Italy-based Gruppo Editoriale L’Espresso

worked with Taboola on rolling out a new sponsored content business. Last

year Taboola announced a strategic partnership with Yahoo! JAPAN to launch

“Yahoo! Content Discovery,” introducing content recommendations onto

hundreds of premium partner sites across the Yahoo! Japan News network.

“We’re extremely honored to gain the support of such an esteemed global

partner as Baidu,” said Adam Singolda, founder and CEO of Taboola. “We

believe that discovery has massive growth potential in both existing and

untapped markets around the world, and we plan to grow this new category

even further with Baidu to help change the way people in China discover

content they may like and never knew existed.”

Taboola’s predictive technology analyzes hundreds of real-time signals

(including collaborative filtering, geography, social media trends, and more) to

deliver highly-personalized content recommendations. Its platform includes

sophisticated targeting capabilities for marketers, and first-of-its-kind content

optimization tools for publishers that are provided free of charge.

(Source: Catherine Shu, “Baidu, China’s Leading Search Engine, Makes Strategic Investment In Content Reco

mmendation Platform Taboola”, 2015)

Baidu Acquisition case with PU

In October 2015, Baidu acquired the Brazilian daily deals site Peixe

Urbano (PU) that was originally launched in 2010 and has over 25 million

registered users. Speaking at the Baidu World Conference in Beijing, PU’s

CEO Alexander Tabor spoke of how the company had benefited from

implementing technology and strategy learned from Baidu. “In the past, we

always looked to the US to see what was happening and what [tech] was

applicable to Brazil. However, in recent years China has developed a fertile

ecosystem for new mobile and O2O products and services” he said.

Post acquisition, PU adopted technology and operational practices from

Baidu’s own daily deals site, Nuomi, such as building neighborhood clusters of

merchants, improving push messaging to the app’s users, implementing

coupons redeemable via mobile and tweaking the discount levels to attract

and grow users. “These and other initiatives have helped PU to grow revenue

by 138 percent since the Baidu acquisition” added Tabor.PU executives have

bi-weekly conference calls with Baidu and Nuomi and have set up a

knowledge sharing system where PU can learn and adapt Chinese O2O

technology and operational practices to apply them to the Brazilian market.

With these successful case mentioned above, Baidu enlarges its steps in both

North & South American market, we believe a similar action in the EU market

will also bring comparable or even more benefits that Baidu retrieved from the

cases above.

(Source: Timothy Coghlan, How Baidu is Expanding Globally, 2015)

Study Summary

This study was divided from 2 companies (Baidu & V2Future)’ perspective.

From V2Future, cooperating with Baidu is definitely the right step to fulfill the

company mission—connect EU and Chinese business opportunities, but to

gain greater success, V2Future needs to

(1) To build more partnership with Chinese internet companies like Baidu (e.g.

Tencent, Alibaba Youku etc.) so that V2Future can provide not only a single

company’s product to EU companies, but also a full internet solution to those

EU companies;

(2) To help their EU local customers make right adaption so their presentation

into those Chinese internet platforms can be really efficient for the Chinese

internet users.

For Baidu, we again need to divide into 2 scenarios—

1. To attract international customers going to China, Baidu needs to optimize

the process internally to match fill the culture gap, and also develop

partners like V2Future, who really understands both China/Local business

to build the bridge between Baidu and the local companies

2. To step out of China, Baidu needs to – (1) Greenfield with correct region

and market, where they are capable to compete with Google or any local

players; (2) Focusing on the Travel related industry, for regions where they

are less competitive with their own local resource; (3) Acquire local internet

companies once the target and the market is right

List of References

V2Future internal document—The Short Cut from Alps to Great Wall

ABS MBA International Business 2013-2014 course material by Alan Muller

Baidu internal document – Baidu international business intro media kit 2013

Pankaj Ghemawat, (2001) Distance Still Matters, TOOL KIT September, pp.138-139

Barry Hedley, (1977) Strategy and the “Business Portfolio”, Long Range Planning

February, pp 193-195

Michael.E.Porter, (1979) The Five Competitive Forces That Shape Strategy, Harvard

Business Review March-April

Jay B.Barney,( 1995) Look Inside for Competitive Advantage, Academy of Management

Executive, 1995 Vol.9 No.4, pp 55

Baidu internal document—Baidu Travel Annual Review 2013

Travel in China http://www.euromonitor.com/travel-in-china/report

http://www.z-punkt.de/

China National Tourism Administration (http://en.cnta.gov.cn/)

Home.baidu.com

www.v2future.com

https://www.wikipedia.org

Michael Bonfils, Why Baidu’s International Mobile Strategy Will Change Everything, 2015

Catherine Shu, “Baidu, China’s Leading Search Engine, Makes Strategic Investment In

Content Recommendation Platform Taboola”, 2015

Timothy Coghlan, How Baidu is Expanding Globally, 2015

Interview with Mario Fan, the CEO and Co-founder of V2Future B.V.

Interview with Charlse Song, the Director of Baidu international business