Baidu Bids for Attention in a Crowd

When you're the leading search engine in the world's most populous nation, every new venture is an important one. This morning's official launch of Baidu.com's (Nasdaq: BIDU  ) consumer-to-consumer marketplace is probably even more significant.

The open beta rollout of Baidu Youa bears watching. If successful, it can trickle into even bigger opportunities for the search engine rock star in areas where it is already established.

  • Attracting merchants also implies potential advertisers on Baidu's own search engine.
  • Encouraging the use of Baidu's branded BaiFuBao online payment platform opens other viral growth opportunities.
  • Advertisers in China are likely to pay more to advertise on Baidu if it earns a reputation as a place where shoppers are spending money instead of the lingering knock of Baidu as a hub of music file piracy for freeloaders.

The shoppers are coming
In its preliminary testing phase, Baidu received 100,000 seller applications to market their wares through Youa. It picked out just 10,000, and then invited 50,000 users to kick the tires.

When you have 100,000 potential sellers going through the application for a brand new marketplace platform, you know you're doing something right. Running the site that generates roughly two-thirds of China's search engine queries will naturally draw a crowd, but now Baidu has proven that it can attract a crowd with money to spend, too.

This naturally brings us to BaiFuBao. If you think a successful marketplace can be a potent high-margin venture, things get even better when the company is also attached to a popular transactional platform. You know eBay (Nasdaq: EBAY  ) of course. Did you know that merchant services at eBay's PayPal beat the namesake marketplace this past quarter in terms of payment volume? It did.

A world of marketplaces
Regional marketplaces can be big businesses. Stand-alone players like Gmarket (Nasdaq: GMKT  ) in South Korea and MercadoLibre (Nasdaq: MELI  ) in Latin America are growing quickly.

The problem for Baidu, naturally, is that it's not the first company to dream up the C2C concept in China. Alibaba Group, which mastered the B2B niche with Alibaba.com, also runs the consumer-powered Taobao marketplace that drove eBay's EachNet out of China.

Does Baidu have advantages in avoiding eBay's miscues in China? Sure. It's a local favorite. It also serves up most of the country's Web searches, something that will also naturally come in handy when someone performs a search for a particular product.

It makes sense, but maybe it makes too much sense. Blending search with commerce certainly hasn't been much of a meal ticket closer to home.

Anyone remember Froogle or Google Base? Google's (Nasdaq: GOOG  ) push into product searches and classifieds are still around, but under different names and as minor priorities. Yahoo! (Nasdaq: YHOO  ) promotes its ability to run small business websites and set up small e-tailer storefronts, but the company shuttered its fledgling C2C auction marketplace last year. Microsoft (Nasdaq: MSFT  ) runs the country's third-largest search engine. It's actually taking the bold step of offering cash rebates to fuel traffic to its comparison shopping site.

Add it all up and search hasn't necessarily been a gateway to e-tail riches, beyond serving up contextual marketing ads in search query result pages.

So between Taobao cornering the Chinese market on one end and dot-com historians shaking their heads given how search engines have faltered in connecting search to viable marketplace platforms on the other, it's easy to dismiss Baidu Youa.

That could be a huge mistake. China's online development hasn't followed the stateside blueprint. Just because eBay failed in China, doesn't mean that there isn't room for two C2C marketplaces, especially now, when a much larger segment of China's 1.3 billion citizens is online.

Baidu Youa can do more than change the game for Baidu. It may also change the history book.

More Foolishness about Baidu:

Microsoft is a Motley Fool Inside Value pick. Google, Gmarket, and Baidu.com are Motley Fool Rule Breakers picks. eBay is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

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.

Stock news, financial commentary, and your daily dose of Foolishness: Get plugged in to the The Motley Fool on Twitter!


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