Baidu’s “Panda” Update

Baidu has taken a lot of flak over its failure to adequately protect intellectual property. China’s most visited website has in the past year been sued by a domestic writers guild, Japanese manga publisher, international music labels, and put on a list of “notorious market” for counterfeit and pirated goods by the US Trade Representative. Tough times call for tough measures, and Baidu, feeling the heat, unleashed a “Sun Storm” in return.

“All webmasters could do was pray and watch as the chaos unfolded,” wrote Susan Lin of Nanjing Marketing Group, one of the first English commentaries on the algorithm update. Sites that sold counterfeit goods or distributed pirated intellectual property were targeted, with some 150 brands and 1.4 million keywords affected, says Lin. Baidu also made changes to its PPC system to disallow use of brand names in advertisements.

Besides keeping government watchdogs at bay and lawsuits away, these changes are also good for the user experience and bottom line. As Google remarked back in March on its European Public Policy blog, concerning its own fight against counterfeit goods peddlers, “After all, a Google user duped by a fake is far less likely to click on another Google ad in the future.” This is one fight where Google and Baidu are on the same side.

Google and Baidu have very different interests at stake: in most of the countries where Google is strongest, counterfeiting is comparatively rare, and the state does a decent job at cracking down on it. In China, piracy is far more common—in the world’s largest market, the temptation to subtract royalties from marginal costs is overwhelming. And China’s government doesn’t need to be strongly in favor of intellectual property rights for a long time. As many commentators have pointed out, all China has to do to improve their standard of living is copy the West for a generation or so until they reach parity. Until then, China has a comparative disadvantage in innovation.