Full Description

Baidu, Inc. (Baidu), incorporated on January 18, 2000, is a Chinese-language Internet search provider. The Company conducts its operations in China principally through Baidu Online Network Technology (Beijing) Co., Ltd. (Baidu Online), its wholly owned subsidiary in Beijing, China. It also conducts its operations in China through Baidu Netcom Science Technology Co., Ltd. (Baidu Netcom), which holds the licenses and approvals necessary to operate the Company’s Websites and provide online advertising services. In January 2008, the Company launched a Japanese search service at www.baidu.jp, run by Baidu Japan. The Company’s Japanese search services enable users to find relevant information online, including Web pages, images, multimedia files and blogs, through links provided on its Websites.

Baidu offers a Chinese-language search platform on its Website www.baidu.com. It provides Chinese-language Internet search services to enable users to find relevant information online, including Web pages, news, images and multimedia files, through links provided on its Websites. It also offers online community-based products and entertainment platforms, such as Baidu Post Bar, Baidu Knows and Baidu Space. Baidu designs and delivers online marketing services to its pay-for-performance (P4P) customers and other customers who require online marketing solutions. The Company’s auction-based P4P services enable its customers to bid for priority placement of their links in keyword search results. Its online advertising services allow customers to use both query-sensitive and non-query-sensitive advertising services, including text links, graphical advertisements and other forms of online advertising. As of December 31, 2008, Baidu had over 197,000 active online marketing customers.

Products and Services for Users

Baidu focuses on offering products and services that enable users to find relevant information. It offers a number of services at Baidu.com to users free of charge. Baidu’s Web search allows users to locate information, products and services using Chinese-language search terms. The Baidu Web search includes related search, search in results, search by Chinese phonetics, advanced search, snapshots, spell checker, stock quotes, news, knows, postbar, images, video and space information, and weather, train and flight schedules and other local information. Baidu Post Bar provides users with a query-based searchable community to exchange views and share knowledge and experiences.

Baidu News provides links to a selection of local, national and international news, and presents news stories in a searchable format, within minutes of their publication on the Web. Baidu News uses an automated process to display links to related headlines, which enables people to see many different viewpoints on the same story. Baidu Knows provides users with a query-based searchable community to share knowledge and experience. Through Baidu Knows, registered members of Baidu Knows can post specific questions for other members to respond and also answer questions of other members. Baidu MP3 Search provides algorithm-generated links to songs and other multimedia files provided by Internet content providers.

Baidu Image Search enables users to search millions of images on the Internet. Baidu Image Search offers features, such as search by image size and by image file type. Image listings are organized by various categories, which are updated automatically through algorithms. Baidu Video Search enables users to search for and access through hyperlinks of online video clips that are hosted on third parties’ Websites. Baidu Space allows registered users to create personalized homepages in a query-based searchable community. Registered users can post their Web logs, or blogs, photo album and certain personal information on their homepages and establish their own communities of friends who are also registered users.

The Company offers a variety of online search and community products. Baidu Encyclopedia is an encyclopedia compiled by registered Internet users. Baidu Search Ranking provides listings of search terms based on daily search queries entered on Baidu.com. The listings are organized by categories and allow users to locate search terms on topics of interest. Baidu Web Directory enables users to browse and search through Websites that have been organized into categories. Baidu Government Information Search allows users to search various regulations, rules, notices and other information announced by People’s Republic of China government entities. Baidu Postal Code Search enables users to search postal codes in 354 cities in China. Educational Website Search allows users to search the Websites of educational institutions. Baidu University Search allows users to search information on or browse through the Websites of specific universities in China.

Baidu Legal Search enables users to search a database that contains national and local laws and regulations, cases, legal decisions, and law dictionaries. Baidu Love is a query-based searchable community where registered users can write and post messages to loved ones. Baidu Patent Search enables users to search for specific Chinese patents and provides basic patent information in the search results, including the patent’s name, application number, filing date, issue date, inventor information and brief description of the patent. Baidu Games is an online channel that allows users to search or browse through game-related news and content. In October 2008, the Company introduced a financial information Website, Baidu-Hexun Finance, in collaboration with Hexun.com, a financial information service provider in China with news reporting and securities consulting licenses. Users can search or browse through economic and financial news, information relating to personal wealth management and related market statistics. Baidu Statistics Search enables users to search statistics that have been published by the People’s Republic of China government. Baidu Entertainment is an online channel for entertainment-related news and content. Users can search or browse through news and other information relating to specific stars, movies, television series and music. Baidu Dictionary provides users with lookup and text translation services between Chinese and English.

Baidu Youa is an online shopping platform through which merchants can sell their products and services at Baidu-registered stores. Baidu Desktop Search is a free, downloadable software, which enables users to search all files saved on their computer without launching a Web browser. Baidu Sobar is a free, downloadable software, which, once installed, shows up on a browser’s tool bar and makes the search function available on every Web page that a user browses. Baidu Anti-Virus offers users anti-virus software products and computer virus-related news. Baidu Internet TV (known as Baidu Movies) allows users to search, watch and download free movies, television series, cartoons, variety shows and certain other programs hosted on its servers. In February 2008, it launched Baidu Safety Center, which provides users with free virus scanning, system repair and online security evaluations. In December 2008, the Company launched, in collaboration with Japanese personal handy-phone system operator Willcom Inc., Chinese-language voice assistant search services for Chinese speakers visiting Japan.

Products and Services for Customers

Baidu focuses on providing customers with targeted marketing solutions. It generates revenues primarily from online marketing services. The Company’s P4P platform enables its customers to reach users who search for information related to their products or services. Customers may use automated online tools to create text-based descriptions of their Web pages and bid on keywords that trigger the display of their Web page information and link. Baidu’s P4P platform features an automated online sign-up process that allows customers to activate their accounts at any time. The P4P platform is an online marketplace that introduces Internet search users to customers who bid for priority placement in the search results. The Company engages third-party distributors to sell some of its online marketing services to end customers and offers discounts to distributors as consideration for their services.

The Company offers certain customers consultative services, such as keyword suggestions, account management and performance reporting. Baidu suggests synonyms and associated phrases to use as keywords or text in search listings. These suggestions can improve click-through rates of the customer’s listing and increase the likelihood that a user will enter into a transaction with the customer. The Company helps manage customers’ P4P accounts by, among other things, adjusting keywords from time to time at their request to help increase the click-through rate for their listings. Baidu also provides its customers online daily reports of the number of click throughs, clicked keywords and the total costs incurred, as well as statistical reports organized by geographic region.

Baidu offers ProTheme services to some of its Baidu Union members. The Company’s services enable these Baidu Union members to display on their properties its customers’ promotional links that are relevant to the subject and content of such members’ properties. Baidu generates revenues from ProTheme services based on the number of clicks on its customers’ links and share the revenues with its Baidu Union members in accordance with pre-agreed terms. The Company’s fixed-ranking services allow customers to display query-sensitive text links at a designated location on its search results pages. Its Targetizement services enable customers to reach their targeted Internet users by displaying their advertisements only when their targeted Internet users browse Baidu’s certain Web pages.

The Company operates its advertising service, Baidu TV, in partnership with Ads it! Media Corporation, an online advertising agency and technology company. Baidu TV provides advertisers access to the Websites of its Baidu Union members, allowing advertisers to choose Websites on which they post their video advertisements with the aid of its advertisement targeting and matching system. It also offers a brand advertising service, Brand-Link. In June 2008, the Company launched My Marketing Center, a customized platform integrating industry information, market trends and business, and industry news and reports to assist existing customers in their sales and marketing efforts. Other forms of its online advertising services allow customers to display query sensitive and non-query sensitive advertisements on its Websites, including graphical advertisements.

Baidu Union

Baidu Union consists of a number of third-party Websites and software applications. Baidu Union members incorporate a Baidu search box or toolbar and match its sponsored links with the content on their properties. Their users can conduct search via the Baidu search box or toolbar and can click the sponsored links located on their properties. The Company has also launched programs through which it displays the online advertising of its customers on Baidu Union Websites, and share the fees generated by these advertisements with the owners of these Baidu Union Websites.

The Company competes with Google, Yahoo!, Microsoft, Sina, Sohu, Netease, Tencent, MSN Messenger, Alibaba’s Taobao, Tencent’s Paipai and EachNet.