Sunday, September 25, 2005

Baidu's Six Years(3)

"Know ourselves, build our strength, cut our weakness, improve and improve!"

In Baidu's internal magazine, the above quotation from Robin Li is on the top page.

Like what is written, in the operations of the company, Li cares very much about the influence of the traditional Chinese culture on employees as well as the whole company. That is also why he named all the offices in the company with words from the poems of poet Qiji Xing of Song Dynasty.

For the same reason, Li also cares Baidu's position as a Chinese internet company.

For him, whether it was the "lightning plan" of 2002, or the Nasdaq IPO of 2005, Baidu is not just represent himself and the thouand employees, but also represent a Chinese internet enterprise born and grown in China.

"As citizens of Chinese enterprises, we should know our heavy burden and we must win". Li said that. And he did that too.

After they succeeded in defeat Google with the "Lightning plan", Baidu did not see face to face with the big rivalry for quite some time.

In April, 2004, the silence was broken. This time, Google knocked on the door. They did not come for a fight, but for making a deal.

On a Friday morning, Li just came to the office when the phone rang. It was from a senior officer of DFJ (Draper Fisher Jurvetson).

"Robin, Google wants to talk to you for a deal!"

It was hard even to imaging that Google would choose to collaborate with Baidu. The first response from many people would be "Google wants to buy Baidu". But the smart Li knew it was not that simple.

And he soon found out that Google's request was not related to acquisition. At that time, the search giant was on a road show for it's nasdaq IPO preparation. Google easily deflected many tough questions from the investors except one of them: Why Baidu basically owns the Chinese market, why Google hasn't done much in China?

To avoid this question from becoming an obstacle for Google's IPO, Google's board decided to purchase part of Baidu's stocks to show that they have had at least some achievements in China.

Robin Li instantly refused. He could not see any benefit from Google's joining as shareholder would bring to Baidu at that time.

Two months later, IPO was closer, and Google again asked for buying shares of Baidu.

This time, Li took long time to think it over.

Comparing with two months ago, the situation has changed quite a bit.

The enthusiasm surrounding Google's IPO had increased quickly among market analysts and investors. Bidding prices had been adjusted up again and again. Li saw an opportunity there. Because Baidu's Nasdaq listing has been put up on agenda, if they could get the world's largest search engine provider be part of Baidu's ownership, it definitely helps Baidu's IPO by boosting foreign investors' confidence.

"Yes, let them in", Li decided in a meeting of top executives.

But when negotiation started, Robin Li made three clear conditions: One, Google's ownership can not exceed 20%; two, Google can not take a seat on the board; three, Baidu would not obligated to provide detailed ownership structure, change in management as well as detailed financial reports.

Deeply influenced by the conservative Chinese culture, Li did not want "to let the wolf in".

see update - Google Plans to Buy Baidu?

On Jun. 15, Google formally announced that they have bought a 2.1% stack in Baidu.

When rumors spreading that Baidu might be bought by Google, Robin Li saw the light. He knew that Baidu was another step closer to Nasdaq.

Before Baidu bought it, Hao123 has been a partner of Baidu for some time.

"It is a typical defensive move", said a senior person at Baidu who was involved in the deal.

In June 2004, an intelligence report from marketing department was submitted to Li. The analysis clearly showed that the traffic on Hao123 had surpassed the combined total traffic of Sina, Yahoo.China, and Sohu. In the ranking(which is followed by Chinese firms extensively for marketing purpose), Hao123 was ranked the number 25 around the world.

At the same time, many Chinese web portals such as, Eachnet(now joined eBay), and were all having long-term collaborations with Hao123. Baidu was also one of them.

We must acquire Hao123 before it fell to other people's hands, Robin Li got the instincts.

Immediately, Baidu called XingPing Li of Hao123: "We'd like to acquire Hao123, Let's talk about it".

The previous good relationship played a positive role. For quite some time, Baidu has provided server and broadband support to Hao123 for free. And Baidu has been paying Hao123's share of clickthroughs on time. All these things has made Xingping Li felt friendly.

$1.3 million made the deal. There was not much bargain and negotiation at all.

When Baidu announced the news on Aug. 31, it was a bombshell in the industry. When a reporter asked Robin Li why would Baidu spent so much to buy an website where there are only links without much fancy stuff? Li smiled without an answer. In Li's opinion, to make Baidu the number one visited Chinese website on Alexa ranking is much more important than "potential commercial value".

"Today, failure does not equal to an valuable learning experience. It means failure, period. So Baidu must succeed", Li says it all the time.

-->Part 4


Post a Comment

Subscribe to Post Comments [Atom]

<< Home