International Conference on Information, Business and Education Technology (ICIBIT 2013) Chinese Internet Companies and Their Quest for Globalization Harlan D. Whatley1 1Swiss Management Center, Zurich, Switzerland Abstract players in the technology market (Sun, 2009). Chinese internet companies have seen an This qualitative research paper unprecedented growth over the past explores the quest for globalization of decade. However, very few are two successful Chinese internet recognized brands outside of China while companies: Baidu and Tencent Holdings. some seek to develop their brands in In this case study, the focus is on the foreign markets. This paper analyzes the marketing strategies of these expanding marketing strategies of two internet multinational enterprises and the companies: Baidu and Tencent and their challenges they face to become quest for globalization. recognized as global brands. All of the firms in this study were founded as Keywords: Baidu, Tencent, internet, private enterprises with no ownership ties branding, marketing, globalization, China to the Chinese government. Furthermore, an analysis of the countries and markets 1. Introduction targeted by the firms is included in the study. In addition to a review of the Innovation efforts by technology current academic literature, interviews companies in China are driven by adding were conducted with marketing and significant value to imported foreign strategy professionals from the technologies or by developing new perspective firms as well as journalists products to satisfy specific domestic that closely follow Chinese internet firms demands (Li, Chen & Shapiro, 2010). and the technology sector. This study on Firms in the emerging market of China do the globalization of Chinese internet not possess the R&D resources that their firms will contribute to marketing developed Western counterparts have. research on this region and sector. However, this is changing as Sino internet enterprises extend their reach 2. Baidu globally into foreign markets. Boisot and Meyer (2012) argued that it is easier for Co-founded in 2000 by Robin Li, who Chinese firms to develop their business in dropped out of a PhD program at the foreign markets as opposed to the State University of New York at Buffalo, government controlled domestic market and Eric Xu, a Silicon Valley venture in mainland China. More attention is capitalist, Baidu is China’s most popular being directed towards Chinese search engine (Rabkin, 2012). Also, it is multinational corporations as they have the world’s leading Chinese language risen from humble beginnings to search engine and is ranked as the becoming recognized as international world’s fifth most popular web site (Alexa.com, 2012). The firm is publicly © 2013. The authors - Published by Atlantis Press 229 traded on the NASDAQ stock exchange strategy is in its very early stages of and has a market capitalization of $41.6 execution now. We appreciate how billion (Jiang, 2012). Baidu is ranked dynamic the situation is in all emerging 25th on the BrandZ list of the Top 100 internet markets, and we'll have to be Most Valuable Global Brands adaptable, responsive, and opportunistic” (MillwardBrown.com, 2012). The name, (personal communication, September 5, Baidu, translates from Chinese to English 2012). as “hundreds of times” and comes from a Song Dynasty poem (ir.Baidu.com, 2012). 2.3 Partnerships Frank (2012) emphasized that 2.1 Baidu’s business model partnerships are valuable for two reasons: Baidu’s primary revenue streams come companies will get more market value from advertising via Pay per Click (PPC) and gain the trust of its clients and it can and search engine optimization via Pay provide better services to regular for Placement (P4P). In 2009, Baidu consumers. One of Baidu’s strongest revamped its business model to provide partnerships is with the Chinese better targeting and a new pricing microblogging site, Sina Weibo, which structure that calculated ad values based has over 300 million users and is China’s on competitors' blind bids (Greenberg, Jie answer to Twitter. The partnership is in & Hardy, 2009). In essence, they response to Baidu’s shuttering of their comingle paid search results with natural microblogging product, Baidu Talk, and ones. Baidu Union, where Baidu’s search provides cooperation between the two box field is used on partnering web sites, firms in the areas of search, content, generates shared revenue with hundreds platform, technology, and resources (Lau, of thousands of sites. Recently, Baidu 2012). planned to generate revenue through In the fall of 2011, Baidu released online marketing on its Baidu Yi, its mobile operating system popular Baidu Tieba online forum, which built around Android OS. Lee (2012) will allow clients to market products to reported that Baidu partnered with Dell the forum's users (Investor’s Business Computer to include Baidu Yi on Dell Daily, 2012). handsets and tablets. Baidu Yi has been rebranded as Baidu Cloud and was 2.2 Marketing strategies recently launched on a TCL smartphone Baidu’s marketing strategy includes (Millward, 2012). Other partnerships for effective market segmentation and a Baidu include web-based travel services focus strategy in order to raise its click companies Qunar and Skyscanner. These rate and increase site traffic (Kotler, partnerships are in line with Google’s Keller & Lu, 2009). Jiang (2012) recent acquisition of Frommer’s, a U.S. stressed that “Baidu benefited travel services company (Olanoff, 2012). tremendously from its early-mover status, 2.4 International efforts a carefully crafted ‘China’ brand image, and its aggressive (and sometimes Cooper (2010) observed that “language is questionable) marketing tactics that have an important element in ensuring a involved paid search ranking, site consistent brand culture” (p. 13). Baidu blocking, and paid removal of negative announced its intentions to enter the results” (p. 16). According to Kaiser Kuo, Japanese search market in December Director of International Communications 2006 and began server testing in Japan in at Baidu, “our international growth March 2007 with an official launch in 230 January of 2008 with web, image, video Qihoo 360 who touts their browser as and blog search services (Baidu.com, being more convenient coupled with 2012). Like eBay’s attempt to crack the superior malware/anti-virus capabilities, Japanese market, this has been a difficult despite Baidu’s superior content and task for Baidu. From 2008 to 2011, resources (Zhang, 2012). Baidu lost 700 million RMB as search engine titans Yahoo! and Google 3. Tencent Holdings dominate the Japanese market (Hopkins, 2012). Founded by “Pony” Ma Huateng and four In May of 2012, Baidu launched an college students in Shenzhen in 1998, office in Australia aimed at helping local Tencent’s QQ service offers a chat firms tap into the potential of China's program, a search engine, an e-commerce internet space. Baidu formed a joint marketplace and some of the most venture with a Sydney-based firm, China popular online games in China (Einhorn Search International, and recruited some & Stone, 2011). Wu and Frantz (2012) seasoned talent from Telstra and stated that "the mission of the company is NineMSN to spearhead the initiative to enhance the quality of life through (Apostolou, 2012). internet value added services" (p. 95). In 2012, Baidu formed BIRC, a joint Tencent Holdings is publicly traded on research lab in Singapore with I2R, to the Hong Kong Stock Exchange and is focus on natural language processing ranked 37th on the BrandZ list of the Top technologies, allowing Baidu to research 100 Most Valuable Global Brands Thai and Vietnamese language (MillwardBrown.com, 2012). In Chinese, capabilities (Wee, 2012). This will give Tencent means, roughly, "galloping Baidu a better idea of their customer base message", which is in line with its core in these countries, where they already instant messaging product known as “QQ” have launched products such as the (Tencent.com, 2012). Hao123 web directory, Baidu Tieba and Tra Da Quan (social networking service) 3.1 Tencent’s business model (Russell, 2012). Unfortunately, Hopkins Tencent segments its business into the (2012) shared that Baidu has encountered following groups: Corporate some operating license issues with the Development Group (CDG), Interactive Vietnamese government. Wee (2012) Entertainment Group (IEG), Mobile noted that Baidu is doing quite well in Internet Group (MIG), Online Media Indonesia due to the large Chinese ex-pat Group (OMG), Social Network Group community there. (SNG), Technology and Engineering 2.5 Competition Group (TEG) and Tencent E-Commerce Holding Company (ECC) (Tencent.com, Baidu faces stiff competition from 2012). Recently, Tencent announced that English language search engines Google it would adopt an open platform business and Yahoo! but has managed to form an model, a major strategic shift for the alliance with Microsoft’s Bing. With company (Shen, 2012). Google’s exit from China to Hong Kong Tencent entered into a partnership with in 2010, this created an even better Zynga, the US game maker best known stronghold for Baidu, which now controls for games like FarmVille, which it 80% of the Chinese search engine market created for Facebook. China Economic (Greenberg, Jie & Hardy, 2009). In China, Review (2012) affirmed that the breadth Baidu is continually being challenged by of Tencent’s games business includes 231 mobile applications, social games, online connection to the media or content shooters and massively multiplayer role- business are looking to get in. playing games (MMORPGs). In 2011, Tencent set up a 500 million RMB online games accounted for 5.3 billion investment fund in April of 2011 focused RMB or 55% of Tencent’s revenue (Shen, on online entertainment content that 2012). Tencent faces fierce competition included a 4.4% stake in Huayi Brothers in the online games market in China from Media, producer and distributor of some Shanda, Netease and ChangYou (Olsen, of China's most popular film and 2011), although China Economic Review television productions (Coonan, 2012).