China's Google, Baidu, eyes Japan expansion

By Vinicy Chan

HONG KONG (Reuters) - Baidu (BIDU.O), known as China's Google, still intends to seek a domestic listing but is focusing for now on ramping up a fledgling Japanese service with plans to hire dozens of people in the second half.

Baidu, the undisputed leader with more than half the search market in the world's second-largest Internet arena, is investing $15 million in Asia's largest economy to extend its presence beyond its home country and take on the likes of Google (GOOG.O) and Yahoo (YHOO.O).

Chief Financial Officer Shawn Wang said on Friday that the firm's domestic Chinese listing plan would have to take a backseat to its global expansion for now, which began with a soft launch in Japan under the domain name www.baidu.jp.

"We're not expecting any near-term revenue, but it's a market of huge potential," Wang told Reuters in an interview.

"Search is a big arena."

Industry sources say the ambitious firm -- which got its name from a line in a Song dynasty poem about finding the one right woman in a million -- is setting its sights beyond Japan.

Some say South Korea could be Baidu's next destination, but Wang would not address that speculation on Friday.

But Wang kept mum as to the firm's future plans, except to say it fully intended to list in Shanghai or Shenzhen, once regulations allowed.

Overseas-registered firms are now barred from floating shares on mainland China's massive domestic markets.

"We don't necessarily want to be the first one. If someone hasn't done it before, and you want to try it in China, you have got to be prepared," Wang said.

"It's one of our wishes, but we haven't been pursuing that actively," said the former partner at PriceWaterhouseCooper's capital markets division.

MARCHING ON

Analysts believe Baidu plans to also eventually widen its net beyond search engines and delve deeper into messaging and advertising, encroaching on areas dominated by portals such as SINA (SINA.O) and Tencent (0700.HK).

China's top Web search provider swept past expectations by more than doubling second-quarter profit to 141.9 million yuan ($18.8 million).

With over 162 million Web users, China is the world's largest Internet market after the United States. Baidu dominated the domestic search market in the second quarter with a 58.1 percent share, followed by Google's 22.8 percent and Yahoo's 11.6 percent, according to research firm Analysys International.