As we reported yesterday, Chinese tech giant Baidu is finally diving into Southeast Asia. After years of toeing the water with limited product launches, the company announced that it is going all-out in Indonesia, launching ten services (five web and five mobile) that run the gamut from a battery-saving phone app to a desktop web browser and antivirus suite.
But why Indonesia, and why now? What does Baidu get out of a big Indonesia initiative?
A huge market with huge potential. Indonesia is the fourth-largest country on earth by population, with around 250 million people. That’s a gigantic potential market. But internet and smartphone penetration rates in the country are still relatively low; smartphone penetration is expected to be around 25 percent by the end of this year, and internet penetration is still around 20 percent. It makes sense for any company to get in early before the inevitable internet explosion that’s already starting to get underway in the country, but it makes even more sense for Baidu. As one of China’s earliest successful internet companies, Baidu has experience building and growing in a rapidly-developing, potentially-huge Asian market already, and in Indonesia it likely sees a similar opportunity to the one that led CEO Robin Li to found the company back in 2000, although Indonesia is admittedly further along the development path than China was back then.
An insurance policy and a jump out ahead of competitors. It’s no secret that Baidu is facing increased domestic competition from companies like Qihoo as China’s internet wars heat up. Baidu still dominates the search market, of course, and it’s certainly not about to concede defeat to anyone. But at the same time, establishing itself in Southeast Asia does give the company a backup plan and alternative revenue streams in case Qihoo proves capable of snagging a bigger piece of Baidu’s pie in the future. And of course, by beating Qihoo and other Chinese tech giants to the Indonesian market, Baidu is establishing a position of strength and giving itself a significant advantage should those companies ever decide that they’re interested in markets outside China, too.
(Of course, it’s worth noting that Baidu is trailing Tencent, which has already been pushing WeChat hard in Southeast Asia for some time and has already opened a joint-venture in Indonesia).
A stepping-stone. Baidu is not a total newbie in Southeast Asia, but it has not made an all-out effort in any country the way it now seems to be in Indonesia. Of course, it will not be able to carbon-copy its Indonesia products to other Southeast Asian nations, but the lessons it learns about localization and the experience gained by its managers in the new market as its products develop there will be invaluable in further expansion efforts.
Of course, Baidu is not the only company interested in Indonesia, and even if its Chinese competitors aren’t in the region yet, it will certainly face strong challengers. But it does have a lot of money it can bring to bear to boost its offerings in the country. Will that be enough for success? We’ll have to wait and see.