It is the mark of a truly successful brand when a product name passes into common parlance. Hoover is one example, as is Sony’s iconic portable cassette player, the Walkman. Apple’s range of portable MP3 players, the iPod, is a more recent example, and of course, there is the world’s most successful search engine: Google.

The California-based internet giant has come to dominate the global search market, accounting for more than 87% of searches in the UK and 68% in the US in May 2008, according to online data experts Hitwise. But there is one major global market where Google has struggled to make a real impact – and that market just happens to be country with the largest number of internet users on earth. We’re talking, of course, about China.

Google’s share of the Chinese search market pales into insignificance compared to its local arch-nemesis Baidu. Google holds a mere 25% of the search market in China; Baidu, by contrast, controls more than 60%.

Foreign observers are fascinated by Baidu’s consistent ability to outperform the clear global market leader. At the 17th International World Wide Web Conference, WWW2008, in Beijing earlier this year, Baidu vs. Google was a common topic of conversation. Most speakers and delegates praised Baidu for its clever manipulation of the local market. But some warned that, in the long run, Google’s sheer size and international scope may give it a slender advantage.

Advantage Baidu

Business practices, rather than the quality of its search results, have contributed to Baidu’s dominance in China.

One of Baidu’s strategies, according to Paul Denlinger, principal of the strategic investment advisory firm China Business Strategy, has been to educate small businesses about keyword search. “Baidu has built up a network in China,” Denlinger said. “It’s basically built around educating Chinese small businesses about search and monetizing it up front, whereas Google is [simply] moving Silicon Valley culture to China.”

By developing and promoting advertising products such as targeted keyword ads and paid search results among Chinese businesses, Baidu has grown its advertising business quickly, with first quarter 2008 revenues reaching RMB 574.4 million (USD 83 million), more than double the same period last year. Over 99.5% of these revenues are derived from online marketing, and profits also increased almost 100% year-on-year.

The Old Coffee Pot

Office culture is another area in which Baidu shows its affinity with local businesses. Visitors to Google China’s office in Beijing note that, in contrast to the lively atmosphere at corporate headquarters in Mountain View, California, the whiteboards and brainstorming rooms that act in California as the creative hub － or venue for practical jokes － are barely used. The result is a somewhat strained corporate atmosphere.

Baidu’s office, by contrast, is less colorful and more welcoming. “I walk into Baidu and they serve me out of an old coffee pot,” says Lonnie Hodge, CEO of Culture Fish Media (文化鱼), an online marketing firm based in Guangzhou. “It’s a homegrown place.” Hodge sees Baidu as more friendly to advertisers and businesses in China than Google, which he says is less responsive to individuals and has far fewer people devoted to working with small Chinese businesses.

It’s not only cultural factors that make Hodge a proponent of Baidu. The Chinese firm, he points out, makes advertising cheaper for businesses by paying incentives to advertising companies, thereby eliminating much of the need to charge a commission to the end advertiser. “They’re cheaper across the board, they have a higher hit ratio, and their demographic is as broad as Google’s,” Hodge adds. “So why would you use Google?”

Organic Results

Bloggers in English and Chinese frequently debate which site provides better search results, something that’s extremely hard to measure empirically.

To the extent that internet users vote with their mouses, Baidu is the clear leader among Chinese users. Anecdotally, a key advantage may be the fact that Baidu appears to break down Chinese queries more naturally than Google at the moment, but the real advantage is an established lead and users sticking to what they know.

Zhang Tao, Baidu’s manager of international business, admits that Baidu’s clear lead over Google in terms of user numbers is in itself an advantage, as the results delivered by both Google and Baidu are often fairly similar, so there is no compelling reason for Chinese users to make the switch to a less familiar rival. “If I’m using Google or Baidu and I can’t find what I need, the first step is to change my query, not change search engine,” he says.

But because of Baidu’s willingness to sell top search results, many critics acquainted with Google’s organic search results model have cried foul. Paid-for links appear alongside “natural” search results on the Chinese engine’s results pages. Google has built its following in the United States and many other countries on the assumption that “unadulterated” search results are the holy grail. Western users are therefore quick to suggest that Baidu’s results are heavily manipulated by advertisers.

It is far from clear, however, whether a search query is ever really all that organic. Businesses in the West spend a significant amount of time and money on search engine optimization work – trying to bump websites as high up Google’s search results as possible by tweaking the layout, metadata and keywords on any given webpage. Moreover, paid results on Baidu are marked, just as they are on Google. The key difference is that they appear interspersed with organic results on Baidu, while Google segregates them on the right.

In addition, Baidu makes efforts to keep advertisements at least relevant, if not organic. “We make sure the user experience is still good,” says Baidu’s Zhang Tao. “If you own a flower shop, you can buy results for ‘flower,’ but if you want to buy ‘chocolate’ — because people looking for chocolate often want flowers too — and your [home] page does not contain the word ‘chocolate’ we will not approve the ad.” Every paid link, Zhang adds, is reviewed by human members of staff.

Google's Advantage

However, according to Google China’s president, Kai-Fu Lee, the California-based firm has a major technological advantage over its Chinese rival. Speaking at WWW2008, Lee touted Google’s strength in an area in which Baidu simply doesn’t compete: cloud computing.

The “cloud” is the network of thousands upon thousands of processors and a worldwide system of more than 30 data centers that allows Google to provide services such as Google Mail, Google Documents, and many emerging applications that keep user data available, no matter whether people access the internet from work, home, or mobile devices.

Perhaps Baidu’s advantage will only be temporary, then. A well-connected Chinese internet consultant and blogger known as Keso wrote in late April that Google’s real competitor is not Baidu, but Alibaba – a multifaceted e-commerce website connecting Chinese suppliers and foreign buyers which offers a far more complex package than Baidu.

Where's the Dough?

This is a future battle. For now, the challenge for all Chinese internet firms is how to monetize Chinese web use – a far from an easy task.

Speaking at WWW2008, Baidu’s chief scientist, William I. Chang, pointed out that at that at present just one in eight of China’s 220 million-plus internet users earns more than RMB 5,000 (USD 726) a month.

As the number of users and the wealth of Chinese people in general rises, the money-making opportunities will increase, but for now, it’s hard to know how much money is to be made online in China.

This question will determine the long-term success, or otherwise, of both Baidu and Google in China. But for now, at least, expect Baidu to continue to outperform its more illustrious American rival.