Baidu: Cheap Knock-off or Investment-grade Innovator?


What’s the first thing you think of when you think about Chinese products?

Is it quality and original design? Or is it mass production and low quality? Or, is it forgery and knock offs?

The first thing I used to think of was copies.

Traditionally, Chinese markets have been great at copying original products. Remember the old jokes about ‘Rolax’ or ‘Omaga’ watches? Or even the straight out copies of Nike and Adidas gear?

It’s no great shock to anyone that you could probably buy a Manchester United top in China for about $5. That’s about $100 less than authentic gear.

The Chinese certainly have a reputation for knock off products. But that’s all changing, and one tech giant is leading the way.

Copying products and stealing information is all too common. Cyber security is clearly a global problem for global companies. You often hear about Chinese hackers targeting American companies and vice versa. Their purpose is to rip off trade secrets and corporate information.

Corporate cyber espionage isn’t limited to China. Every major nation has a cyber-spy agency. There’s the NSA in the US, the GCHQ in the UK and the Australian Signals Directorate, to name a few of the big ones.

However, today we’re not focusing on cyber security. That’s a topic we’ll cover more over the next few months. In particular, we’ll look at the opportunities it presents.

My point today is that, though it may appear two companies are doing the same thing, the reality is likely different. In fact, it might be with the more unassuming company where the real opportunity lies.

The lines can get blurry when it comes to ‘new’ technology. Many companies have similar products. You might even think some have simply copied others.

A good example is Baidu and Google.

Although Baidu tries to distinguish itself from Google, it seems it’s following Google’s lead nearly every step of the way. A couple of weeks ago, Baidu entered the smartglasses market.

Is Baidu Like Google, or better?

As we all know, Google has been developing Google Glass for a number of years. Hopefully, soon they’ll have product ready for mass market. But while Google develops and refines their product, others companies want to crash the party.

Baidu is widely seen as the ‘Google of China’. They are easily China’s biggest search engine. China Internet Watch estimates that Baidu has 81.7% market share of internet search by revenue in China. Google is next, with a tiny 10.9%.

But Baidu wants more. Like Google, they know that to be a global tech giant, they must diversify. So they are. Baidu has a new piece of wearable tech. They call it BaiduEye.

BaiduEye is kind of like Google Glass. In the sense that it provides the user with real time information on their head, it’s very similar to Glass. But BaiduEye is different in that it will have no visible screen.

Baidu thinks screens are distracting. Instead information will feed into the device through a camera perched next to the head. But it will provide audible information through its earpiece or the connected app.

Baidu realise if they simply imitate Glass, they’ll forever be ‘China’s Google’. But in this case, they’ve purposefully gone a different route. My take on it is they want to change the public’s perception of their company image. They want the world to see them for what they are — a giant global search company. They’re like Google, but they’re certainly not Google or even a mere copy.

To tar them with the brush of a rip-off copy of Google is what many from outside China will do. But when you consider the size of China’s market, they should reconsider.

Baidu has no reason to copy Google. And by taking a different direction, they may prove to the world what they’re capable of.

Look at it like this: China has around 20% of the world’s population. In comparable terms, the population of China is roughly equal to the population of North America, South America, Australia, New Zealand, and all of Western Europe!

When you look at it like that, who would want to be Google? China’s internet penetration is still only 45.8%, according to the China Internet Network Information Centre. Of those, around 81% connect via mobile.

Baidu knows internet penetration in China will continue to grow. One day it may even be on par with Australia. That means around 83% of the population using the internet.

Yes, it’s a long way to go. But when they get there, it will mean 1.12 billion people online (based on current population figures).

No matter how you look at the numbers, China’s going to bring more and more users online in the coming years — most through mobile devices. And that means technology like BaiduEye will have a huge market to tap.

Baidu has a bright future. But don’t think of it as a Google imitator. They might be similar. But as an investment opportunity, Baidu might be better.


Sam Volkering
For The Daily Reckoning Australia

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Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered.

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slewie the pi-rat
slewie the pi-rat
2 years 24 days ago
disclosures: i yam a Luddite-on-a-bike and have barely enough lo-speed tech to study, blog, gamble, and look at dirty pictures; without ever having owned a cell phone, tablet, or even an ipod, no less… this product sucks, imo. but i yam slewie and cannot imagine wanting a search engine to report verbally in any language, unless i should go blind from the porn-capades, of course. but again: “normal” and “slewie” do not usually end up in the same sentence. instead of re-inventing the wheel, the Chinese have re-invented the portable 2-way-radio and glued it to a Chinese-talking incarnation of the… Read more »
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