Businessmodel of Baidu

Customer Segments

Baidu provides a range of search platforms tailored specifically to the Chinese-speaking population. It operates the most popular search service in China, which accounts for almost 88% of the site’s web traffic, followed by the US with 4.63%. Globally, however, Baidu accounted for less than 1% of the web search market in 2015.

Within the Chinese-speaking community Baidu serves general consumers and internet users, as well as more niche segments with its law and legal and regulatory database Baidu Legal Search, financial portal Baidu-Hexun Finance, and patent and trademark database Baidu Patent Search.

In addition to serving general consumers, Baidu also provides marketing and advertising services to brand marketers and advertising agencies.

Value Propositions

Baidu’s greatest value is that it provides a full suite of web search services that are tailored specifically to serve a Chinese-speaking audience. The Company has a variety of portals and services that enable users to integrate their accounts across multiple channels. These channels are all available from anywhere via mobile and web browsers and the Company’s range of mobile apps.

Baidu provides an extensive set of search tools that cover a broad spectrum of interest and needs, from legal searches to news portals.

As the largest search provider in China, serving more than 663 million monthly active users, Baidu also provides a large audience for brand marketers and advertising agencies to expand their marketing reach and interact with their target audiences.

Channels

Baidu operates an online portal hosted at www.baidu.com. The Company also operates a series of proprietary websites for its other services, including www.news.baidu.com, www.hao123.com and www.nuomi.com.

Baidu also operates its own app store, through which customers can download Baidu and third-party apps. Baidu functionality is also integrated into a range of affiliate websites and technology products.

Customer Relationships

Baidu offers a range of self-service products. Users can access the Company’s main web portal, as well as many of its other services, without registering an account or interacting with members of the Baidu team.

Advertising customers can enquire about paid search and display advertising campaigns by contacting Baidu directly, either over the phone or via email, and receive personalised service and a custom quote that fits their individual needs.

The Company provides support to its customers through user guides and FAQs, and interacts with customers through its social media accounts, including on Facebook, Twitter and China’s Sina Weibo.

Key Activities

Baidu is a Chinese technology and web search company. It provides a range of Chinese-language search products organised around its main web portal hosted at www.baidu.com.

In addition to its flagship search engine, the Company offers Baidu PostBar, world’s largest Chinese-language query-based searchable online community platform; Baidu Knows, the world’s largest Chinese-language interactive knowledge-sharing platform; and Baidu Encyclopedia, the world’s largest user-generated Chinese-language encyclopedia.

The Company generates revenue through digital advertising and marketing solutions provided to brand marketers and advertising agencies through its own websites and its affiliate companies. Baidu also operates a network of technology, integration and affiliate marketing partners.

Key Partners

Baidu collaborates with a network of technology partners, integration partners and affiliate marketers. The Company has tie-ups with high-profile multinational companies including Amazon, with which it has partnered to power the Amazon Kindle Fire in China, and Microsoft, with which it has collaborated in promoting Windows 10 software to Chinese consumers.

Baidu has also partnered with web performance and security company CloudFlare, web discovery platform Taboola and performance marketing agency Merkle, and has teamed up with BMW to develop driverless cars in China.

Additionally, Baidu operates a network of affiliate partners, which drive traffic to Baidu by integrating search boxes into their own websites or by displaying contextual promotional links for Baidu customers.

Key Resources

Baidu’s key resources are its online platform and proprietary technologies, its IT infrastructure and its personnel. Baidu has several patent applications filed in its name with the US Patent and Trademark Office through subsidiary companies Beijing Baidu Netcom Science and Technology and Baidu Online Network Technology.

This includes applications entitled ‘Method and system for pushing point of interest information’, ‘Method and apparatus for monitoring state of online application’ and ‘Display screen with graphical user interface’.

Cost Structure

Baidu incurs costs in relation to research and development, IT infrastructure maintenance, marketing and traffic acquisition, retention of personnel and bandwidth.

The Company accrues human costs through its workforce of more than 43,000 employees and operational costs, including rental and utilities, in relation to its offices across China, Japan, USA, Thailand, Brazil, Egypt and Indonesia.

Revenue Streams

Baidu generates the vast majority of its revenue – more than 98% of total annual revenue in 2014 – through the provision of online display advertising and digital marketing solutions across its own proprietary websites and its network of affiliates.

The Company operates a pay-for performance advertising platform which functions effectively as a web-based auction system, allowing customers to bid for priority placement of advertisement links in relation to key word searches made by Baidu users. The Company uses a Comprehensive Rank Index that gives priority placement to links based on bid prices and a link’s quality score, which is determined by calculating the relevance of the link against a user’s search query. Fees are only applied on a pay-per-click basis.

Customers can also be charged based on the number of telephone calls directed to the customer as a result of their advertisements. Additionally, Baidu offers paid search services, where a customer’s link will be placed at the top of a search using selected search terms.

A recent investigation into Baidu’s medical advertising practices was launched after a 21-year old cancer-sufferer accused the Company of promoting false information on its search engine. The student died after a treatment identified through the search engine failed. The investigation is expected to affect Baidu’s advertising revenue, 20% to 15% of which is reported to come from medical advertising.

In response the Company has announced that it will switch its focus from a search-oriented business model to one based on artificial intelligence.