Saturday, October 08, 2005

Baidu Payment Is Coming Soon

Baidu and Industrial and Commercial Bank of China(ICBC) signed "Electronic Commerce Strategic Collaboration Agreement" to build online payment platform

Oct.8, 2005, Industrial and Commercial Bank of China and Baidu has signed "Electronic Commerce Strategic Collaboration Agreement". The two sides will co-develop an online payment system and work together on other areas such as paid search ranking, news advertisements, marketing development and virtual card service. The agreement covers collabrations in many areas, multiple directions and in many levels.

This is the first e-commerce agreement has ever been signed by Baidu. It also indicates that "single-minded (on Chinese search)" Baidu is now have "second mind" --marching onto e-commerce field.

Lightning Agreement

Baidu's spokesman Haijun Yang told us: Baidu will collaborate with ICBC on a series of e-commerce service issues. "This time ICBC and Baidu will jointly issue Virtual Card(which is an online payment card with name and account number hidden, similar to Paypal), and open a special customer service, provide modern ICBC payment products to Baidu's customers as well as jointly provide Baidu's products to ICBC's 18 million online banking customers." That is to say in the future, when you purchase Baidu's paid services such as online video or electronic post cards, you can connect to ICBC's payment platform directly to make an online payment anytime 24 hours a day.

One Step Away

E-commerce often refers to online exchange activities which includes B2B, B2C or C2C models. In fact, after development of an online payment system, Baidu is only one step away from e-commerce. That is to build an online sales website.

Regarding this prospect, Baidu's vice-president Dong Liang says, the agreement to work with ICBC, is mainly for providing online payment platform for Baidu's personal paid services. Currently, Baidu has no plan to enter B2B or B2C areas. Baidu will continue to focus on Chinese search. Baidu's spokeman insists that "if considering these as e-commerce, it is only marginal. The purpose is to meet the purchasing needs of our huge customer base."

However, many in the industry look at this differently. For example, Alibaba's president Shuai Wang said that, according to industrial analysis, e-commerce is becoming the most promising model of internet economy. In building the online payment platform, you cannot exclude the possibility that Baidu will get into e-commerce.

Kiss The Baby For The Nurse's Sake

Regarding the connection between Baidu and ICBC, the well-known internet analyst Weigang Lu was not surprised: "I think Baidu will get into e-commerce soon".

He said, Baidu will likely to go around resellers and deal with small to medium business customers directly. The goal is to increase the profit margin. On the online video and MP3 services, Baidu can play a role as distributer for the rights owners and share profits with them. Google.China is still depend on resellers while the e-commerce companies such as Alibaba are playing roles like wholesellers. Relatively, Baidu has the advantages. It is still uncertain how much each of these competitors can gain their shares. One thing is certain though that the competition will be more fierce among them.

Other analysts think it is the intense competition that has led to the collaboration between Baidu and ICBC. Among other big search players, Yahoo, Google, and even Microsoft have annouced their entries into the e-commerce field. Currently, Baidu is only doing Chinese search and thus with weaker image. To increase revenue, it is possible that Baidu has made changes in it's main strategy.

Separately, Baidu announced also that they will jointly establish a research lab with Peking University on Chinese search behaviors. It will be the first research center focusing on search behaviors. It will focus on in depth research on motives and behaviors of Chinese internet users, to discover the practical search needs of Chinese users.

Yesong Huang and Yin Wang from Chongqing Business

Note: ICBC is the largest commercial bank of China and one of the top 1000 banks in the world with 25% of China's total bank owned assests. ICBC has the most state of art online banking service in China with it's top-ranked(2004) "personal online banking" service. It has been rated the strongest 500 enterprises in the world for four consecutive years.

For Chinese readers, you can access the original news release in Chinese here.


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