ALIBABA, JACK MA, BAIDU, ROBIN LI AND TAOBAO

ALIBABA.COM

Alibaba.com is China’s largest e-commerce company, business-to-business site Internet retailer and online auctioneer. A private company, Alibaba is based in Hangzhou, two hours south of Shanghai, and was founded in 1999 by it owner Jack Ma. As of December 2010 Alibaba.com claimed to have 57 million users, including some in nearly every country. It is sometimes likened to eBay, but is more like an online Yellow Pages.

Alibaba.com is known mainly for linking Chinese manufacturers with buyers around the globe. In 2009, Alibaba claimed 8 million users. Revenues grew 39 percent to $440 million. In 2007, Alibaba was valued at $3 billion. The Chinese -language business — business market place had 14 million regular users and its Taobao consumer auction had a 57.7 share of the market in China, compared to 31.5 percent for eBay Alibaba is partly financed by Goldman Sachs and Softback of Japan.

Alibaba has 15,000 employees. In October 2007, it raised $1.5 billion in the second-biggest initial public offering of an Internet company ever after Google Inc. A month later, shared surged 193 percent on their first day of trading in Hong Kong with the price rising from 13.5 Hong Kong dollars (US$1.74) to 39.60 Hong Kong dollars. The rise occurred after demand exceeded allocation by 150 fold.

The Economist reported: The firm faces several obstacles. First, the Chinese internet market is cut-throat and evolving fast. Baidu, the country’s leading search engine, has not yet attacked Alibaba head on, but one day it might. Second, talent is in short supply. Wages for the best engineers and managers are soaring. Third, in its rush to grow, Alibaba has neglected to make much profit. Its main services are free, with sellers paying only for extras such as being bumped to the top of a list of search results. Mr Ma says this is deliberate: size will eventually bring rewards. But investors will not wait for ever. Recognizing this, Alibaba.com, the listed part of the group (most of which is private), promised in December to pay a special dividend of $140 million in January. [Source: The Economist, December 29, 2010]

Alibaba's Jack Ma

Alibaba.com was founded by Jack Ma, an English teacher turned entrepreneur who is now one of China’s most well-known businessmen. Time selected Ma as one of 100 most influential people in the world in 2009. Adi Ignatius, chief editor of the Harvard Business Review, wrote in short profile, “Meeting Jack Ma, you might be forgiven for thinking he’s still an English teacher. The Internet entrepreneur is soft-spoken and elflike — and he speaks really good English...Ma, 44, runs one of the world’s biggest B2B online marketplaces, an eBay for companies doing international trade.”

“In a country where tycoons are often the children of politicians, Mr Ma stands out,” The Economist reported. “He failed twice to get into college. He learned English from the radio. He stumbled on the internet during a trip to America as an interpreter in the mid-1990s. He typed the phrase “Chinese beer” into a search engine. No results appeared. He saw an opportunity. He started Alibaba in 1999, to help small firms find customers and suppliers without going through costly middlemen. [Source: The Economist, December 29, 2010]

Ma said he entered the Internet business in 1995 after he was kidnaped in Los Angeles and talked his way out by promising to help his kidnapper start an Internet company. He started one of the first Internet companies in China, a small company that made some home pages, with the helps of some of Ma’s friends in the U.S. See Yahoo

Jack Ma has encouraged his employees to give money to worthy causes. He has donated $5 million of his own money to set a Grameen-style bank with Grameen founder and Nobel Prize winner Muhammad Yunus to provide modest loans to farmers and small businesses in Sichuan and Inner Mongolia.

On how his company stayed in its feet in the early years when going was tough, Ma told Ignatius, “There three reasons why we survived. We had no money, we had no technology and we had no plan.”

Alibaba’s Business Activity

The Economist reported: “A dozen big screens hang on the wall. Maps flash. Numbers stream by. The Alibaba Group’s “live data monitoring room” offers a snapshot of frantic activity: Chinese firms trading with foreign ones; Chinese individuals buying clothes from each other. Perhaps half a billion people use Alibaba’s various online services.” Jack Ma “smiles that business is “pretty good”. Yet he is far from satisfied. [Source: The Economist, December 29, 2010] Alibaba’s staff boast of the businesses they have nurtured. One Chinese village had a stack of rabbit meat, having skinned the creatures for fur. The chief asked for suggestions. A villager sold the lot on Alibaba.com. More commonly, clients are small firms that want to link cheaply to the global market. Machine-makers in Turkey or Britain use Alibaba to find cheap suppliers in China without having to go there. Buyers can read reviews that others have written about each seller, which fosters trust, though it is far from foolproof.

The Alibaba campus in Hangzhou looks much like the offices of a zippy firm in Silicon Valley. The architecture is airy and feng shui-compliant. Employees enjoy ping-pong and free massages. Grey hairs are as rare as neckties. As is common at Chinese internet firms, a disproportionate number of senior managers are foreign-educated or have worked abroad. [Source: The Economist, December 29, 2010]

Alibaba Subsidiaries

The Economist reported: “China has millions of small entrepreneurs but a primitive financial system. To boost traffic through his websites, Mr Ma set up an online payments system, Alipay, in 2004. Its growth was greatly helped by the impedements that China placed, until recently, before its American rival, PayPal. Alipay says it now has 470 million users worldwide and that more than 500,000 Chinese merchants accept it. In some Chinese cities people can use it to pay their utility bills. [Source: The Economist, December 29, 2010]

Another venture, Taobao.com, sells to consumers. It has 300 million customers and shifted $29 billion-worth of goods in 2009. It is like a scrappy cross between Amazon and eBay: it operates an online mall where vetted sellers can hawk their wares, and a site where anyone with a Chinese identity number can sell anything legal to anyone. It generates money through advertising.

Mr Ma has also started a service called Ali-loan. He does not lend money, but works with banks, which typically have no idea if a small borrower is creditworthy. Mr Ma, in contrast, has a trove of data revealing whether small firms pay their bills on time. He can also bundle together firms that know each other, so that a seller can help guarantee a bank loan to a regular customer. According to Alibaba the proportion of Ali-loan’s lending that goes bad is a trifling 0.35 percent, which suggests that the service could be expanded fast.

Alibaba’s Rich Marketing Database

The Economist reported: “Alibaba has a huge and barely exploited asset: the data it has gathered on the spending habits of China’s emerging middle class. The firm is cagey about what, exactly, it will do with these data, and insists that it will not violate anyone’s privacy. Nonetheless, there are ways in which Alibaba could profit from what it knows. One idea might be to use customer data to identify trends and so help companies to anticipate what consumers want. Given the paucity of accurate data in China, this would be extremely valuable. [Source: The Economist, December 29, 2010] Another promising area might be credit. Ali-loan does not charge for its credit-scoring service for business borrowers, and says it has no plans to. But it would make sense: a small fee on each loan would be almost pure profit. And there is no practical reason why the group should limit itself to helping businesses borrow money. Another glittering prize would be to help Chinese consumers obtain credit, too. Very few can do so at the moment. Many would doubtless like to.

This is a politically sensitive area, however. The government largely controls the allocation of credit in China. Through state-controlled banks, it funnels the nation’s savings to large, politically favored firms. Would an expansion of credit to the little people be seen as a threat to this cosy arrangement? Some in government probably think it a good idea to help small businesses and even consumers get loans, but others are cautious. The Communist Party is terrified of credit bubbles, the bursting of which might spark unrest. So Mr Ma must tread carefully.

BAIDU.COM

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Baidu's Robin Li
Baidu.com is China most used Internet search engine. Modeled after Google, it make money by selling advertising next to search results and using a ranking system for its search in which companies pay for high listings and give Baidu.com a commission based on the number of hits they receive. Baidu had a 78.3 percent share of China’s search engine market as of early 2012, according to Analysys International, a research firm in Beijing. Google Inc. was in second place with 16.7 percent, while Sogou, Tencent Soso and other competitors had less than 3 percent each.In 2008, it had 63 percent of the search engine market, compared to 26 percent for Google and 8 percent for Yahoo. Google has invested millions of dollars in Baidu.com.

Baidu was founded in 1999 with an early investment from Google and quickly established itself as China’s largest search engine. By the time Google sold its stake in Baidu and set up its own Chinese-language search engine in 2006, Baidu was already expanding its site in the hopes of building a community that would stick around longer on the site.

Launched in 2002, Baidu is one of the world’s mostly widely used websites because of its dominance in China. It is widely respected in China as a company that has taken on competition from a foreign giant (Google) and come out on top. As of 2009, Baidu processes more search request in China than Google did in the United States.

Baidu has thrived since its rival Google closed its China search engine in 2010. Baidu's market share has risen to 75.9 percent (June 2011) from 64 percent in the first quarter of 2010 before Google's closure, according to Analysys International, a research firm in Beijing. Some put Baidu’s market share at 83 percent. Google is still China's second-most popular search engine but its market share has declined from 30.9 percent to 18.9 percent. In September 2010 Baidu’s market share was 73 percent, compared to 22 percent for Google.

Baidu.com (pronounced “by-doo”) means “100 times” and is derived from a well-known Song dynasty poem. In the beginning the company has just seven employees. Now it has 3000. When it debuted on the NASDAQ in August 2006 it was dubbed the Chinese Google and its stock prices soared from $27 to $151 in a single day. The American stock market had seen anything like the dot.com boom.

Baidu’s Robin Li

Robin Li, the CEO and founder of Baidu.com, was born in Shanxi Province in 1968. He started the company in January 2000 with $1.2 million borrowed from two U.S. venture capitalists when returned to China after getting a Masters degree in computer science at the University of New York in Buffalo and working in Silicon Valley, including a stint working on search engines ay Infoseek Corp, for several years. Li drew a huge of audience when he spoke in September 2009 at Stanford University, where Google founders Larry Page and Sergey Brin went to school.

In 2007, at the age of 38, Li's net worth was valued at $2.4 billion, making him richer than Jerry Yang of Yahoo. He has said he owes his success to good timing. When he returned to China it had only 8 million Internet users. Now it has 160 million.

Baidu’s Robin Lis was listed as China’s second richest man by Forbes in 2010 with $7.2 billion. He held the same rank in 2011 with $9.2 billion. The 2011 Hurun list listed him as third with $8.7 billion.

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Baidu Business

Li started Baidu in 2000 with just $1.2 million in venture capital. Baidu had a stock market capitalization of $13.3 billion in late 2007. It makes good profits from advertising. In 2005, it had 41,248 online customers, double from a year before, and earned about $40 million with profits of $6 million.

In February 2102, Baidu Inc. reported its latest quarterly profit rose 77 percent over a year earlier as customer numbers and spending per customer rose. Profit for the three months ended Dec. 31 was 2 billion yuan ($326.3 million), or 6 yuan (95 U.S. cents) per share, the Beijing-based company said. Revenue rose 82.5 percent to 4.5 billion yuan ($710.9 million). For the full year, Baidu said its profit rose 88.3 percent over 2010 to 6.6 billion yuan ($1 billion). Baidu said its number of active online marketing customers rose 12.7 percent over a year earlier to 311,000. Revenue per customer rose 61.8 percent to 14,400 yuan ($2,288). [Source: Boston.com February 17, 2012]

Baidu reported a 95 percent jump in net profit in the second quarter of 2011 year on surging traffic growth and strong ad spending. Profit for the three months ending June 30 was $252.6 million. Total revenue rose 78.4 percent from a year earlier to 3.4 billion yuan ($528.4 million)."We benefited from strong traffic growth and improved monetization," said Baidu's chairman and CEO, Robin Li, in a statement. "We were especially encouraged with the strong spending from large customers."

Baidu made $1.2 billion in online marketing revenues in 2010, up 78 percent from 2009. Baidu earned $337 million in the 3rd quarter of 2010 and made $156 million in profits thanks mainly to revenues earned from online advertising. Profits in the forth quarter of 2010 were $175.9 million.

Baidu.com made record profits in the run up to and during the Olympics. In the third quarter of 2009, Baidu earned $56 million on $161 million revenues while Google made $1.5 billion on revenues of $5.5 billion. Baidu gets most of its money by charging customers for ranking on their search lists. Unlike Google and Baidu’s Chinese rivals, which places its paying customers in separate boxes, Baidu lists its paid rankings with its non-paying ones.

As of late 2009, Baidu was valued at $13 billion, and Li’s stake in the company was worth more than $2 billion. At that time the company’s stock was valued at $383 a share, a 14-fold increase from its 2005 initial public offering of $27.

Baidu.com Services

One reason Baidu.come has been so successful is that it has been good at offering chat lines and offering service to orient users to topic they want to discus after they have entered the chat line. Sina.com and Sohu.com have used similar strategies Yahoo tried strategies that worked well in the United States and Europe but didn’t work in so well n China.

Baidu has introduced social Internet services like MySpace.com to keep market share away from Google and yahoo. In May 2006, Baidu launched a Chinese-language encyclopedia. inspired by Wikpedia that carries entries written by users but warns that it will delete content about sex, terrorism and attacks on the government. Baidu also operates in Japan.

Popular Baidu.com features include browser windows that pop up when a user clicks on a search result; MP3 searches for digital music downloads that reach sites where users can download pirated music for free; top 10 lists for things like sodas and snacks; trivia tests, question-and-answer forums and a service that direct users to chat lines for topics they are interested in. Perhaps influenced by Baidu.com ads that claim “We Know Chinese Best,” users say they prefer Baidu.com to Google even though studies show that searches using Google take less time than those using Baidu.com

EMI, Warner Brothers, Sony-BMG, Universal and other recording companies sued Baidu.com for copyright infringement and lost because Beijing No. 1 Intermediate People’s Court decided that Baidu was only a search engine that helped people locate files and offer downloads for pirated material but also ruled Baidu.com must delete links to sites that offer illegal downloads. After the decision Baidu.com launched a similar service for television and movie downloads and EMI joined the Chinese Internet company to offer free song samples, with the two companies sharing advertising revenues.

In November 2008, Baidu.com came under fire for giving unlicensed suppliers of medical products — including ones that sold questionable treatments for cancer, sexually-transmitted diseases and other ailments — higher rankings for pay without alerting customers. Baidu share prices plunged after television news reported the practice. Baidu insisted no laws had been broken and it can’t be responsible to vouch for information on the Internet, still it went ahead and suspended thousands of questionable customers, including unlicensed operators in the medical, beauty and health food sectors, in an effort to restore confidence.

Recently Baidu and Google have shifted their battle from the Internet to China’s mobile phone search market. As of late 2009 the two companies were tied with 26 percent each

One of the company’s most popular offerings is the Baidu Post Bar, an online bulletin board of hot topics that now accounts for nearly 15 percent of the site’s traffic. There is also Baidu Knows, Baidu Space (for blogs) and Baidu Baike, a Chinese version of Wikipedia.

Now, the company is working on an online video site that would work much like Hulu.com, the site in the United States where several broadcast TV networks present their shows.

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Allocation of IPv6 Address Space in China

Baidu and Microsoft Strike a Deal

In July 2011, Microsoft signed a deal with Baidu to provide English-language search results “but they will be censored to meet the Chinese government's demands, according to an article published in The Guardian. The announcement of the deal is a boost to Microsoft, which has been struggling to boost the position of its Bing search engine against Google's dominance in almost every country around the world. It will also be a boost for Baidu, which has ambitions internationally. [Source: Charles Arthur, The Guardian July 4, 2011] Baidu has roughly 83 percent of the Chinese search market, but there are also up to 10 million English searches per day, the company said. Bing “which filters out results in China relating to controversial subjects, such as political dissidents, Taiwan or pornography, to be able to operate in the country “has a negligible share of the market, while Google has nearly 20 percent counting visits to its offshore sites, making it the second-biggest in China. Yahoo has 6 percent and Microsoft's Bing 4 percent, according to Net Applications.

Under the new agreement English-language searches to Baidu will be redirected through Bing. Kaiser Kuo, a spokesman for Baidu, said that Bing searches would not be censored any more "than they already do".

Some analysts were sceptical over how much demand there would be for English search on Baidu. "It's a good thing, but I see very minimal impact for Baidu. I don't see a lot English keywords going through Baidu. It goes through Google," said Wallace Cheung, a Hong Kong-based analyst at Credit Suisse.

Search engine marketing company Greenlight said it saw the deal as positive for both sides, and could envisage the new partners dominating the Chinese search-advertising market. "Whilst it represents an opportunity for Bing to make more money from the Chinese market, Baidu gets what it needs to expand overseas when it is ready to do so," said Greenlight Chief Operating Officer Andreas Pouros.

"Microsoft has entered the Chinese market slowly and has made some friends, in a way that the Chinese government will have no issue with. This should leave Baidu and Bing to control the Chinese search ad market without too much difficulty." Baidu made $1.2 billion in online marketing revenues last year. Microsoft's total online advertising revenue in fiscal 2010, including a small contribution from Bing, was $1.9 billion. However Bing loses almost as much money as it takes in.

Microsoft may be satisfied with delivering censored results. It acknowledged as long as as 2006 that it filtered certain words, including "democracy" and "freedom" from the Chinese version of MSN. At the time Brad Smith, Microsoft's general counsel, said that it was better to do business inside the country than to boycott it. "We certainly think it is better for us to be present around the world rather than not," Smith said in 2006.

Baidu.com Listing Scandal

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office of Douban
In 2008, China Central Television — the biggest state-run network — ran an exposé on how Baidu accepted money to bolster the search results of unlicensed medical companies and steered people to unlicensed and expensive hospitals or medicines that failed to cure them.

One patient told the program that he had wasted more than 10,000 yuan (£950) at a clinic that he chose because it topped the Baidu results. The unlicensed clinic paid Baidu nearly 17 yuan per click (£1.60) for a prominent ranking, according to the report. [Source: Tania Branigan, The Guardian, November 29, 2008]

The program also alleged that some companies that did not pay were omitted from results. But in a statement, the firm insisted: “Baidu has never excluded websites of any customers because they did not pay for keywords, and Baidu does not tolerate such practices.”

The case has caused Baidu's stock to plummet and highlighted users' complaints about the way the Nasdaq-listed firm allows companies to buy their way up the list of search results.

Baidu reviewed its policies. The company said in a statement that it had removed paid search listings for companies that had not filed details of their licences pending checks. Those customers together accounted for around 10-15 percent of its total revenues, it added]

Robin Li, Baidu's chief executive officer, told the state news agency Xinhua that the firm had sacked staff over the case and could fire more. “We have already fired people who helped fabricate documents for unlicensed suppliers,” he said. “We have removed the keywords of all four clients mentioned in the report and have begun to double-check the licences of all other hospitals and pharmacies on our client list.

Baidu also cleverly managed its way through the scandal by paying more than $5 million to be a sponsor of the state network and by courting the Chinese press. Several Chinese journalists say that soon after Baidu suffered bad publicity, the company offered to fly a group of journalists to Hong Kong for a leisurely weekend at a luxury hotel.A spokeswoman for Baidu declined to comment on the Hong Kong press outing, but media coverage of Baidu improved. [Source: David Barboza, New York Times, April 18, 2010]

Attacking Baidu for Skirting the Rules and Cheating Advertisers

August 2011, The Economist reported: “Robin Li, Baidu’s Chinese-born, American-educated co-founder, is only 42 but one of China’s richest men. That makes him a target, despite his scrupulous efforts not to upset the ruling Communist Party. Since August 14th Baidu has been the subject of a series of damning investigative reports on CCTV, the main state-run broadcaster. Using undercover cameras, CCTV exposed Baidu employees apparently helping firms circumvent laws that bar unlicensed companies from advertising online. The reports also suggested that the lack of transparency in Baidu’s advertising system could lead advertisers to overpay. A Baidu spokesman refused to comment. [Source: The Economist, August 27, 2011 ]

It was not the first time that CCTV has bashed Baidu. Reports in 2008 made similar allegations, prompting Baidu to apologise publicly. The latest attacks go further, though. It might seem a bit rich for the state broadcaster of a secretive, authoritarian country to chide Baidu for murkiness. And it certainly surprises some China-watchers. Baidu has done all it can to comply with the government’s whims. It is also a national champion: its shares are listed on New York’s NASDAQ exchange, and foreigners can’t get enough of them. So what might the criticism signify? Is CCTV attacking Baidu for political reasons, or commercial ones? CCTV has a search engine, too, which hardly anyone uses. So do two other big government-run media outfits — the People’s Daily newspaper and the Xinhua news agency. CCTV, though state-run, is not just a propaganda outfit. It is also expected to make money through advertising (and it does). It must be tempting to nobble a rival.

That no other state-run media outlets carried stories on Baidu suggests this is not a government-orchestrated campaign against the company or the internet more generally. However, the Communist Party is wary of the influence of private internet companies, and no doubt keen to see that Baidu doesn’t get too big for its boots.

The party was slow to grasp how big the internet was going to be in China, and it missed its chance to own the digital commanding heights. So it tries to control them indirectly. On August 23rd, for example, Beijing’s Communist Party chief paid a friendly visit to the offices of China’s biggest microblogging site, Sina Corp’s Weibo, and suggested that it “absolutely put an end to fake and misleading information”. Sina Corp, a private firm, deletes postings that annoy the party within hours. Not quick enough, said the party chief.

Perhaps the most likely motive for CCTV’s attacks on Baidu is that its journalists are trying to do their jobs. Public anger about toxic food, corporate mismanagement and official corruption has emboldened reporters. Journalists at CCTV led the extensive media coverage of a high-speed-rail crash at Wenzhou in July that killed 40 people, until the censors curbed them. Such reporting embarrasses the party, which likes to boast that China builds big infrastructure projects faster and better than anyone else. The CCTV attack on Baidu could reflect a decision to go after a less protected target. Or not. This being China, no one knows for sure.

Copyright Charges Against Baidu

On World Consumer Right Day in March 2011 The China Recording Industry Committee of the China Audio-Video Association and a group of prominent artists independently issued two letter lodging their protests — “Open Letter of Opposition to Baidu” and “March 15 Letter by Chinese Writers Opposing Baidu”. [Source: Hu Yong, China Media Project, March 25, 2011]

Hu Yong of the China Media Project wrote: “Both documents pointed fingers at Baidu Books, the search engine’s library service, accusing it of violating the rights of musicians and writers. The “March 15 Letter by Chinese Writers,” written by the hand of author Murong Xuecun said: “They [Baidu] have stolen our works away. They have stolen our rights away. They have stolen our property. Baidu Books has become a market for stolen goods.”

What is Baidu Books? According to its official introduction, it is a platform built and operated by Baidu.com Inc, allowing web users to browse and download documents and other materials from a variety of sources. By uploading files, you can accumulate points that you can then apply for the downloading of materials you need yourself. Owing to this feature, Baidu Books has developed rapidly, and there are now close to 200 million different books and other materials available. A great many of these are materials whose distribution through the platform is not authorized by authors or publishing houses.

The China Written Works Copyright Society now recognizes that Baidu’s evil surpasses that of Google by a factor of one-hundred. “After rights violations by Baidu Books occurred, they might at least have come out with a proposal to resolve the issue, actively negotiating with Chinese copyright holders, but Baidu’s attitude throughout has been cold and indifferent. Baidu has seized on the weakness that while China’s copyright laws are in place, they are imperfect and incomplete. They are playing a game of words, but have a weak sense of social responsibility. They have also seized on this psychology among Chinese web users that it’s great for everything to be free.”

Since last year, there have been many rights actions taken against Baidu Books. But Baidu has invariably applied the “haven principle” in cases of copyright, saying it has no obligation to examine materials uploaded by web users and has no responsibility for rights violations that might occur. The origin of the online “haven principle” lies with the Information Network Transmission Right Protection Ordinance “, which took effect on July 1, 2006, and stipulates that when database and search engine providers receive notification of violations by right holders they can avoid the legal obligation of compensating the rights holder simply by disconnecting the online link.

This is clearly a deliberate shifting of responsibility on Baidu’s part. When web users upload mass amounts of materials, can Baidu really claim this is not a situation in which it is “fully aware or should be aware” that copyright violations are happening” Copyright lawyer You Yunting has said, “Baidu Books and Baidu MP3 have both established clear categories or lists for copyrighted materials, which demonstrates that Baidu is cognizant of its violations. Moreover, Baidu is profiting by advertising sold into pages where copyrighted materials are being provided, so this isn’t just about gratuitously providing information.”

Voices within the industry have finally begun airing their views on Baidu’s monopolization of the industry and copyright violation practices. Li Guoqing, the CEO of online retailer Dangdang, announced recently that the site would pull millions of dollars in advertising on Baidu beginning April 1 this year. Baidu is drawing criticism internationally as well. The Japan Book Publisher’s Association has voiced its displeasure with copyright violations, and the U.S. Trade Representatives Office put Baidu on its list of international services that aid piracy.

Addressing this problem at its source, however, will require the awakening of Chinese users to the problem of copyright violation. Chinese internet users have to understand that the failure to protect rights of any kind is a net loss for Chinese society.

Suit Filed Against Baidu in the United States

In May 2011, the New York Times reported: “Eight Chinese-born pro-democracy advocates filed suit in Federal District Court in Manhattan on Wednesday against one of China’s largest Internet companies, Baidu, accusing it of colluding with the government in censoring Web search results. The suit charges that there is a “conspiracy” between Baidu and the government to censor “any political speech that is pro-democracy.” Jiang Yu, a Foreign Ministry spokeswoman, said Thursday that China guaranteed freedom of speech online and that American courts had no jurisdiction in the country, the news agency Xinhua reported. [Source: David Goodman New York Times, May 19, 2011]

People's Daily Launches Search Engine

In June 2011, the People’s Daily, the Communist Party newspaper, launched its own search engine launch. Known Goso when it was in beta testing, the site has been renamed Jike, meaning “immediate.” People’s Daily said it also chose the name because it sounds like “geek” in English, “representing a computer expert or enthusiast.” [Source: Wall Street Journal June 21, 2011]

The Wall Street Journal reported: “Jike is one of the most ambitious government attempts to enter the commercial Internet space. Though it has a long way to go before posing a direct challenge to Baidu or Google (the site doesn’t yet sell advertisements) and many are skeptical that a publication known as a propaganda organ could build a popular website, People’s Daily appears to be fully intent to prove those critics wrong.

One of the figures heading up the operation is retired ping pong star Deng Yaping, who says the company changed its name and its logo — which is comprised of blue and yellow geometric blocks that make up a Tang Dynasty puzzle — to make it appeal more to young people, who will be Jike’s target users.

Ms. Deng, who also played a role in organizing the 2008 Beijing Olympics, doesn’t have a technology background but has brought on an ex-Googler, Liu Jun, to serve as her chief scientist, and says she is fully aware of the heavy competition she faces. “It’s a very competitive industry. There are already lots of bigger, more mature search companies already,” Ms. Deng said. “But we can’t not do something just because someone is already doing it.” Mr. Liu, who was a research executive at Google China, said Jike’s engineers have built much of Jike’s core search technology from scratch. The company has about 100 employees.

Chinese Internet Companies Support the People's Daily New Search Engine

The Wall Street Journal reported: The “People’s Daily’s fledgling search company may not yet qualify for the big leagues, but China’s major Internet companies nevertheless came out in force for the official launch of company’s website. Executives including Sina CEO Charles Chao, Sohu’s Sogou CEO Wang Xiaochuan and Baidu’s chief scientist William Zhang on Monday were all on hand to help launch the site. People’s Daily executives gave special thanks to the other Internet companies represented in the audience but didn’t fully explain their presence at the launch, saying only that they were “supporters” of the new search product. The surprise show of “support” follows an appearance earlier this month by Mr. Chao at a celebration in Shanghai of the 90th anniversary of the founding of the Chinese Communist Party, during which Baidu CEO Robin Li is reported to have said: “Walking the path of socialism with Chinese characteristics is the well-spring of strength that will allow the Chinese Internet to continue its healthy and rapid development.”

The event itself, held in Jike’s new offices in Beijing’s World Financial Center, was hipper than one might expect from a state media company, ditching the typical parade of long speeches by bureaucrats in favor of a contemporary dance performed by two women in shiny catsuits. The event culminated with Mssrs. Chao, Wang, Zhang and other executives in attendance, such as Qihoo 360 President Qi Xiangdong, joining Ms. Deng and Jike’s Chairwoman Ma Li on the stage to make the launch official.

Unlike at the CCP anniversary event earlier this month, where executives spoke in front of a large red backdrop with the words “Red Birthplace, Eternal Monument,” the Communist Party’s signature color was noticeably absent at the Jike launch.

Taobao

Taobao.com — China's answer to eBay — is the premier auction site in China. It has done so well that in 2006 eBay shut down its own site in China.” “Taobao” means “treasure hunt” in Chinese. The site had 80.9 billion yuan (£7.2 billion) in 2009 first-half sales. That is double the same the previous year and higher than Amazon.com's over the same period. Goldman Sachs estimated that revenue will hit £122 million dollars in 2009. this year. [Source: D'Arcy Doran, AFP, December 7, 2009]

Taobao is a division of Hong Kong-listed Alibaba.com, a business-to-business e-commerce company. Taobao charges nothing to list items for sale and the site's revenue comes from advertising.

Taobao was started in 2003 when eBay controlled 90 per cent of the Chinese online shopping market after buying Shanghai-based EachNet. Within two years, Taobao pushed eBay's market share down to 30 per cent and forced the US-based auction site to stop charging for listings in China. In 2006, eBay's Chinese site shut down.

In 2009, Taobao controlled 82.8 percent of China's online shopping market, according to iResearch, a Chinese consultancy. That year, for the first time, household goods became Taobao's top selling category. Jonathan Lu, said that convenience and a greater price consciousness amid the economic crisis had boosted consumer acceptance of Taobao...What is most interesting is the level of mainstream acceptance of using online retail channels to shop for everyday items, a trend both prominent global brands and small businesses have recognized.” Taobao's sells offers everything from turkeys to televisions and used by students starting new businesses and vendors in Yiwu, the home of the world's largest wholesale market, as well as giants like Dell, Uniqlo, Procter and Gamble, and Chinese firms seeking to step out of the shadows after years of manufacturing for US and European labels.

Taobao Customers

At Yiwu Industrial and Commercial College more than a fifth of the school's 8,800 students run Taobao shops from campus, selling products sourced from the market. The students' shops generated 25 million yuan in revenue last year, according to college officials who have embraced Taobao as a business teaching tool. “When I graduate I will continue with my Taobao business,” a student who sells cosmetics, children's toys, underwear and fashion accessories through Taobao, said. “It's easy to find a job in Yiwu, but once my business is on the right track, I can double or triple my salary compared to people who go work for companies.”

Procter and Gamble started selling Rejoice shampoo, Olay skin cream and Gillette shaving products on Taobao earlier this year at discounts of 20 to 30 per cent to attract customers and build market share. Japanese clothing retailer Uniqlo launched a Taobao shop in April, attracting 430,000 visitors and 4.1 million yuan in sales in the first 11 days.

Computer makers Dell and Lenovo also introduced Taobao sales channels. Companies like Qilong Trading Company, a previously anonymous company that in the past only manufactured for international brands, are also using the site to develop their own labels.

Yahoo Japan and Taobao have formed an alliance to market each other’s products in their home countries, with Yahoo Japan offering about 50 million products sold by Taobao and Taobao selling about 8 million products sold by Yahoo Japan. Taobao offers about 400 million products but many will not be offered in Japan because they do not meet Japan’s drug regulations or they are feared to be counterfeit. Rakutan, Japan’s largest online retailer, also is planning to enter the Chinese market.

Image Sources: Wikicommons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated April 2012


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