Baidu Gets Lost in the Translation

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Baidu.com (Nasdaq: BIDU) has been able to conquer Google (Nasdaq: GOOG) on its home turf of China, but now it has to battle Yahoo! (Nasdaq: YHOO) in Japan. Just three months after announcing its intentions of entering the Japanese search engine space, Baidu has launched Baidu.jp.

No one expects it to beat market leader Yahoo! Japan. It doesn't have to. At $15 million, Baidu's initial investment is modest. Even though Baidu's portal in China includes message boards, blogs, and a clone of the popular Yahoo! Answers rewards-driven Q&A site, its first step in Japan is little more than a website search engine with image seeking functionality.

InfoWorld may have expected more, but I believe that less is more for Baidu at this point. Yes, it has the advantage of watching over the most popular character-language website in the world, but Japanese is most certainly not Chinese. And in Yahoo! Japan it faces a formidable rival that is so established in an already developed market that even eBay (Nasdaq: EBAY) gave up on its auction site there several years ago.

Investing too much would amplify expectations. This is the right way to go. Even a sliver of market share may make a material difference for Baidu. Yes, Japan's population is a fraction of China's 1.3 billion residents, but most of them are already online and advertisers are willing to spend more to reach the more affluent Japanese audience.

There will come a time when Baidu will need that killer app; that sticky attraction that no other Japanese search engine has. For now, it doesn't really matter. Google clawed its way to the top domestically with little more than its flagship search engine before it began to get fancy with things like Web-based productivity software and Google Earth.

It's OK to start small. It's where you are at the end that ultimately dictates your stockholders' fortune.

Baidu is a selection in the Rule Breakers growth stock newsletter service. eBay and Yahoo! are Motley Fool Stock Advisor recommendations. Or to conquer emerging markets, our Motley Fool Global Gains newsletter may be the ticket.

Longtime Fool contributor Rick Munarriz has been to mainland China just once but he's longing to brush up on Mandarin and make it another go in the future. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.