Baidu wants in on Alibaba's turf

HONG KONG (Reuters) - Top Chinese Internet search firm Baidu.com Inc is pondering acquisitions and possibly a Hong Kong share listing to fuel an expansion into the country's consumer Internet market, taking on Alibaba.com in the world's No. 2 Web market.

Chief Executive Robin Li said on Thursday he would not rule out a share listing -- say in Hong Kong -- to help bankroll a foray into the kinds of consumer-to-consumer services, such as online auctions, that Alibaba's "Taobao" and other sites offer.

Admitting that it would be difficult for Baidu to push through a desired home listing, because Chinese regulations all but prohibit foreign firms from selling shares domestically, Li said he nonetheless wants Chinese investors to buy into his firm.

"We would like Chinese investors to have access to a Chinese search company," Li told reporters after speaking to Hong Kong university students on Thursday.

Asked if Baidu might consider a Hong Kong listing, he said: "We will look into all kinds of opportunities."

Baidu, often referred to as China's Google and which derived its name from a Song dynasty poem abut finding the right woman among a million -- commands more than half of its home Web search market but Alibaba reigns supreme in online commerce.

Now, analysts believe Baidu plans to widen its net beyond search engines and delve deeper into messaging and advertising, encroaching on areas dominated by portals such as SINA and Tencent

"We see a strong demand in C2C (consumer-to-consumer service), and the existing players in that space aren't doing a perfect job," Li told the university students in an oblique reference to rivals such as Alibaba.

"We now have a huge user base, and it's just a question of redirecting the traffic we have now, to build a strong C2C platform."

BOWING OUT OF E-MAIL

But Li said on Thursday he had little interest in setting up an e-mail service along the lines of Yahoo's nor would they explore an English-based search site, despite media speculation to the contrary, conceding that rivals did it better.

Li argued that Baidu's connections across China would give it a leg up on efforts to expand beyond its traditional business.

"The set-up cost won't be huge, it's the marketing expense that could be high," Li said without giving specifics.

Baidu beat forecasts by more than doubling third-quarter profit. Its shares have more than tripled so far in 2007, led by a booming Chinese economy, soaring demand for online advertising ahead of the 2008 Beijing Olympics, and market-share gains against foreign and domestic rivals.

The stock slid more than 3 percent on Wednesday, pummeled along with the rest of the market on mounting fears that a U.S. housing downturn would extend well into next year.

Baidu has been gobbling up market share mainly from smaller rivals and Yahoo. It also overtook SINA this year as the largest Web advertising supplier in China, according to a recent report by broker research firm CLSA.

(Writing by Edwin Chan; Editing by Anne Marie Roantree)