After several misguided e-commerce initiatives that ended in failure, Internet giant Baidu (Nasdaq: BIDU) is finally making what looks like a smart move in the highly competitive space by focusing on what it does best: providing search services. In this case, media are reporting that China’s dominant provider online search company has quietly launched an e-commerce search engine, in what looks like a direct challenge to e-commerce leader Alibaba’s own eTao e-commerce search site.
This new initiative from Baidu looks smart from a broader perspective, as it draws on the company’s strength as a search services provider to give it a foothold in the lucrative and fast-growing e-commerce space. If the initiative if successful, Baidu could theoretically use its new Gouwu search service as a platform to enter other more traditional e-commerce services. But it will also need to be careful if it takes that route, since it will need to maintain a reputation as an impartial provider of e-commerce search services or risk losing traffic if consumers perceive the site as favoring Baidu products.
According to the latest reports, Baidu began beta testing the site, gouwu.baidu.com, back in December and formally launched it this week. (English article) The site is similar to Alibaba’s eTao, and allows users to compare prices across a range of major e-commerce sites, including Alibaba’s popular TMall. Baidu has reportedly also launched mobile versions of the site, as part of its broader campaign to boost its presence in mobile search as a growing number of Chinese access the Internet over their smartphones.
This newest e-commerce initiative contrasts sharply with Baidu’s previous 2 major efforts in the space, both of which ended in failure. The first of those saw Baidu launch its own e-commerce site several years ago, while the second saw it pair with Japanese Internet e-commerce leader Rakuten (Tokyo: 4755) to open another site that ultimately closed last year. Baidu’s own lack of experience in the space was a major factor behind the failures, combined with the major competition from more established domestic players like Alibaba and Jingdong Mall, as well as foreign players like Amazon (Nasdaq: AMZN) and Walmart (NYSE: WMT).
While I do like Baidu’s latest approach to e-commerce, which draws on its strengths in online search, the company does face several risks in this latest initiative. For starters, the new search engine is several years behind eTao, meaning it will have to work extra hard to win an audience. The new site could also find itself blocked from indexing contents of some major e-commerce sites, which has happened in the past. What’s more, the business potential for this new initiative could be relatively limited compared with Baidu’s general search service, which currently is the company’s main money earner.
Still, on the whole I do have to applaud Baidu for taking a smarter approach to e-commerce with this new initiatives by targeting an area related to its core search business. I would give this newest initiative a 50 percent chance of success, though I do expect we could see a war of words erupt later this year between Baidu and eTao that could result in an interesting battle for supremacy in the space.
Bottom line: Baidu’s new initiative in e-commerce search looks like a smart move drawing on its core search expertise, with a 50 percent chance of success.
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