Weekly Chinese Internet Note: Baidu’s Rivalry With Qihoo, Tie-Up With Huawei And Account Deletions In China
In our weekly Chinese Internet note, we focus on Baidu (NASDAQ:BIDU). Baidu was fined for noncompetitive business practices in Brazil. It has also partnered with Huawei to implement an indoor mapping system in the phone manufacturer’s devices. Finally, along with Sina (NYSE:SINA), the company also had to delete several user accounts to comply with new regulation in China.
Chinese Rivalry In Brazil
After being accused of using anti-competitive tactics against a startup company supported by one of its rivals, Baidu’s antivirus app was removed from Google Play in Brazil. Baidu’s app gave virus warnings against the PSafe app, a rival antivirus. This resulted in about 700,000 people uninstalling their PSafe app. Subsequently, PSafe initiated legal proceedings against Baidu over this practice. This has proven successful, as the courts have ordered Baidu to remove its app from Google Play, pay a fine of about $40,000 per day and send a message to app users correcting the misinformation spread against PSafe. [1]
It’s believed that Baidu’s attempts were not aimed at PSafe per se, but at one of its funders, Baidu rival Qihoo 360. Qihoo was the leading investor in a $30 million round of financing for PSafe in 2013. Qihoo has also had many bitter public disputes with Baidu over unfair and noncompetitive practices in the past in China. [1]
Tie-Up With Huawei To Offer Indoor Navigation Services
Baidu has announced a partnership with telecom equipment maker Huawei to provide maps and navigation services in large indoor areas. We had earlier written about Baidu’s investment in the Finnish startup, IndoorAtlas. This gave Baidu exclusive access to IndoorAtlas’ indoor mapping software that can electronically locate the position of people to within 2 meters of their actual location. The technology can help guide people to such amenities as ATM machines, restrooms and specific retail outlets in large indoor areas. A Huawei spokesperson said that the products that evolve from this partnership could be rolled out for use in airports in China as early as this year. [2]
Deletion of Non-Compliant User Accounts In China
Following the Chinese government’s announcement that all online user accounts in the country must use their real names, several Chinese Internet companies have deleted non-compliant accounts. Baidu deleted 23,000 such accounts while Sina Weibo deleted about 5,500. The accounts that were problematic were mostly on account of misleading names, links to terrorist groups or the use of vulgar avatars. Analysts have warned that such censorship and attendant loss of users could bode ill for the Chinese Internet companies. However, the companies themselves have downplayed the possibility of such an adverse impacts. [3]
We currently have a $211 per share price estimate for Baidu, which is almost in line with its current market price. Our 2015 revenue estimate for the company at $10.6 billion is also almost in line with the consensus estimate. [4]
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