What Baidu Can’t Handle

Is Baidu heading toward death by a thousand cuts?

There isn’t a lot in Baidu’s immediate future to be worried about: the Chinese search giant has 75% of China’s search market share, reported a 95% surge in profits for the second quarter, and with Google long gone, no other search engine poses a credible threat. Baidu is, however, facing slices to its reputation in what may become death by a thousand cuts.

Losing faith in PPC advertising

Earlier this year more than 20 Shanghai moving companies announced they would quit advertising on Baidu, accusing them of promoting unlicensed moving firms. Higher profile retailers have stopped as well. Dangdang CEO Li Guoqing said he stopped advertising on Baidu because the website manipulated search results and did not respect intellectual property rights. DHgate CEO Diane Wang said advertising on Baidu was ineffective. 360buy.com CEO Liu Qiangdong lampooned the search giant for focusing solely on money and ignoring corporate ethics and values.

Slipping regulatory requirements

The state media has also jumped on Baidu. Last week CCTV ran a special broadcast about unethical PPC sales practices at the search giant. Undercover reporters went to two separate Baidu offices and demonstrated on-air how easy it was to advertise fake pharmaceutical products with the help of complicit sales people to get around the checks.

Creeping animosity with SEO community

Baidu’s own blogging network, Baidu Space, is being overrun by black hat SEOs who use it to build spam blogs, with links to sports jersey sellers for example. While Google has the same problem with its Blogger service, they are transparent about what they’re doing about it and provide a blog spam report. Baidu’s lack of guidelines and transparency with the SEO community, on the other hand, has caused animosity. “Unlike its international counterpart Google, who is always with smiles, welcoming arms and straightforward instructions to SEOs, Baidu.com has put itself at the opposite side of SEOs,” said Ryan Chooai of Chinese SEO Shifu.

This is very bad news for Baidu’s long-term prospects. American search engines have had years to figure out how much SEO gaming to allow. And they’ve produced algorithms that are good in the sense that gaming them benefits users. Baidu hasn’t developed the same kinds of “immunities.” Overseas search engines and international SEOs have Baidu stuck in a vice: they’ll be relentlessly gamed, and the kind of gaming that makes them worse also makes other search engines comparatively better. They’re still earning massive profits from their dominant market position, and that won’t go away soon, but the forces that made them ubiquitous (a solid technical base, good relations with the government, and a “boots on the ground” distribution strategy) won’t be enough to maintain their status quo.