Baidu Riding on Shanda Train

Baidu is riding Shanda fast train aiming at virtual money while power players are marking territories

There are signs that Baidu is speeding up the expansion of Baidu Money. According to Baidu's marketing people, Baidu has signed new agreement with Shanda in mid September. Shanda will provide retail service for Baidu Money in it's 180,000 POPs nationwide.

Internet industrial analyst Bofan Wu said that, "The strong push of Baidu Money indicated that Baidu is starting to gradually expand it's paid search categories. At the same time, the virtual money market is seeing another strong competitor."

Playing the cards of virtual money

　 　Currently, the online market has several payment options. The main payment method is "pay on receiving" such as bank or post wiring and virtual card serivices. For online games or online video services, it is not practical to use pay on receiving. The time cost and the tedious paper work are also making it near impossible and reduces it's value of instant availability.

Similar to the development of the currency market of our societies, if it follows the same trail of evolvement, the online market perhaps will have similar stages from gold to dollars to provide customers quick and convenient way to settle for all the goods consumptions and service enjoyment. Under this big enviroment of prospects, the businesses aiming at the virtual money market are having an intense competition comparable to the competition of the real currency market.

Right now, Shanda, The "9", Tencent, as well as portals such as Sina, Sohu, and Netease all have their own online currencies. It has quietly becoming chased targets from online players. The smokes from the battle ground are overshadowing the virtual currency market.

Baidu's general manager of business development, Xuyang Ren explained that, the current virtual currency market is almost like the ancient Chinese money stores.　Money from each store was limited for exchanging through the same store. The one who provides more services would win larger group of users.

For the same reason, all the internet companies are pushing hard on expanding the virtual payment tool. Mr. Xu, who is in the business of selling online gaming equipments, told this reporter that: before there is detailed regulatory policy, many web companies are marking their territories by pushing out variety of virtual currencies. For players of the web world, they are not only accepting but even addicted to these fast and convenient virtual money. There is clear risk though. Even though the online gaming providers are prohibiting of exchanging gaming points with the virtual money or gaming equipments, such deals are rampant privately. The vacuum of policies are causing chaos between the exchange of gaming points and virtual currency. If the companies do not figure out ways of orderly management and strict controls, there will be risk of potential policy regulations.

Order will take over chaos

According to sources, to push for expanding the Baidu Money, Baidu are collaborating with many channel resalers of virtual currencies. From begining, Baidu is taking a strategy of joining hands with the stronger players instead of challenging them. Besides the deal with Shanda's huge distribution channels, Baidu has also established alliances with online bankers such as Industrial and Commercial Bank of China, China Merchant Bank, China Agriculture Bank, and China Construction Bank for e-commerce collaborations. The Chinapay, which supports 20 domestic online banks, is also providing payment service to Baidu money. At the same time, Baidu has also signed agreements with China Telecom, and China Netcom. Besides these, from the third party payment platforms, Baidu has established relationships with Chinese firm Alibaba's Alipay and the popular American Paypal. On the sales front of virtual card and real card, Baidu has strategic partnership with the large card retailers of Cncard and Junnet.

Baidu walks through the "money trail". Through the sales in Shanda channels, they can reach the base of several million users. From this point of view, it's a huge benefit for Baidu as a starter.

However, Shanda won't settle in as a supporting role. It was rumored that in the agreement, Shanda earns the potential "to use Shanda currency Dianbi(or point money) to pay for Baidu's paid services". Besides the agreement with Baidu, it's not new for Shanda to bundle other companies' payment services. The "Yan Huang" and "Jiu Tian Music" services also can be paid with Shanda Dianbi. It's easy to see that, although owns the largest user base of virtual currency, Shanda dose not expect to gain many more users from starter Baidu. What Shanda is looking for is the "universal" exchange of Shanda's Dianbi.

In not so distant future, from video games to downloading of electronic books, from maps and weather services to online purchase of goods, web service provider will provide more and wider online product lines and services. How to break barriers between the online virtual currency issuers, and to provide virtual currency with more services to win larger groups of users will becoming a very big and practical challenge for service providers or even the whole web industry.

One reputed industry analyst pointed out, to solve the problem, it requires coordinated effort of all the participants. It is not exaggerating to say the market is in the "marking territory" stage. If the situation not be changed, to break the barriers among all the providers will be hard. Baidu and Shanda both have their own perposes. However, as leaders of search engine and online gaming respectively, they can provide a model for mutual exchanges between two providers in two different fields on the internet. Only through this kind of collaboration, it will be possible for a common exchange between all the virtual currencies. "The final result will not be a sole winner, but an elimination of all the barriers. That will make virtual currency a fast and convenient tool that fits the web world's life. It will push the competition of virtual currency to the end. The competition for quality of products and services can redominate the landscape again", Xiong Kang, who has many years of experience in web management, told this reporter. "To end the chaos of competition powers in the virtual market, the establishment of a united common currency is inevitable".

Lu Peng from China Business 10-15-05