IMAGE SOURCE: BAIDU.
Continue Reading Below
Baidu recently announced that it's expanding its Maps offering to three Asian countries and one city-state that are popular with Chinese tourists: Japan, Thailand, South Korea, and Singapore. This move shows discipline and focus on the part of management and is a chance to compete (successfully) withAlphabet'sGoogle Maps.
Narrowing its focusBaidu is the dominant search provider in only one country, compared with dozens for Google. Luckily for Baidu, that country happens to be China, which is home to over 700 million Internet users. In the past few years, Baidu Maps has become the dominant mapping service in the country, batting away competitors both domestic and foreign.
It's unlikely that Baidu will ever be able to make substantial inroads into the many countries where Google is long established and enjoys market shares ranging from 57% to 98%.While the company is making small search engine bets in countries such as Brazil and India, it's focusing on China. The future of this company depends on successfully protecting its domestic market share while tapping into the potentially lucrative online-to-offline (O2O)market.
Adding Maps to Japan, Thailand, South Korea, and Singapore fits within this strategy because it focuses on Chinese citizens abroad. Language issues, a built-in user base, and a history of beating Google once before give me confidence in the success of this rollout. While it's unlikely to have a significant financial impact on the company in the near term, it shows sound decision-making by management and might grow into something meaningful in the long term.
TOKYO, NOW MAPPED BY BAIDU. IMAGE SOURCE: PIXABAY.
Millions of travelersMillions of Chines tourists are expected to travel outside the country during the Spring Festival tourist season, which began on Feb. 8. Most of these travelers already use Baidu Maps at home and have a built-in comfort level with the service. In a quote given toChina Daily, Internet consultancy analyst Zhang Xu said, "Once the service becomes available in foreign countries, it will become their top choice, as the Chinese-language version will hold great appeal to those who can't speak English."
There is a (high) likelihood that Baidu Maps will gain millions of users in these four regions over the coming years. This foothold might allow the company to build a more robust presence including in search, O2O, and video over time. Even if it doesn't lead to this overseas growth, it's still important as a defensive play.
With no Baidu Maps option, it's likely that a traveler who uses Baidu Maps in Mainland China is forced to use Google Maps while touring around Seoul. A positive experience with that service could lead that user to switch to Google upon returning home, convince and convert friends and family, and do harm to Baidu's market share dominance in China.
SEOUL. GOOGLE MAPS STREETVIEW. IMAGE SOURCE: ALPHABET.
Competing with AlphabetBaidu has patterned much of its behavior after Alphabet's Google and has come into direct conflict a handful of times. While Baidu hasn't been able to compete with the U.S.-based search giant in most countries, it has successfully defended its "home turf" and has beaten Google in Maps before. By focusing on Chinese tourists abroad, it's possible that it can succeed once again.
As recently as 2011, Google Maps commanded a 46% market share in China. By Q3 2012, that number was down to 9% as domestic competitors successfully took share. At that time, Baidu retained only 19.1% share and was second to another domestic company called AutoNavi, which was acquired in 2014. Baidu's current mapping market share in China currently sits around 70%, according to ChinaDaily.com. This shows the tremendous gains it has made in just a few short years.
The recipe for this success can be copied in the four new Asian markets, and Baidu can strike a small blow to Alphabet. It's focusing on Chinese consumers, providing a Chinese-language version, and not trying to compete with Google Maps on a broad scale internationally. Baidu's product must be of a high enough quality to compete with Google's. It has built-in advantages with Chinese consumers, but that won't be enough to overcome a vastly inferior user experience. Nevertheless, this is a low-risk move with plenty of upside. I like where Baidu's management is choosing to deploy its resources and plan on holding my shares for years to come.
The article Baidu Inc. Pushes Its Mapping Boundaries Into Other Parts of Asia originally appeared on Fool.com.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Sullivan owns shares of Baidu. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.