How India Could Be The Next Big Opportunity For Baidu?
Baidu (NASDAQ:BIDU) is reportedly looking to invest $100 million in the Indian discount deals company mydala.com and a similar amount in the next one year in small consumer internet start-ups in India. [1] These investments will mark Baidu’s entry in India which could be the next big opportunity for the company. With the growth rate in China slowing down, growth prospects in India are strong. Indian population is expected to surpass that of China by 2022, [2] making it the most populous nation in the world. According to the World Bank, internet penetration in India was around 18% of the population in 2014 and this figure stood at nearly 50% for China in the same year. [3] A high population growth rate, lower internet penetration and increasing disposable income in India, make it a very attractive market for Baidu.
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Internet Users In India Are Growing Rapidly, Presenting A Huge Opportunity
According to a report released by the Internet and Mobile Association of India the number of internet users in India is expected to reach 402 million by December 2015, registering a 49% increase from last year. [4] This will put India ahead of the U.S. which has 375 million internet users and second to China which leads with 600 million users. With Indian population increasing at a rapid pace and internet penetration growing, in the long term India could potentially have the largest number of internet users. Mobile phones are the main internet access point in rural areas of India and by June 2016, it is expected that there will be 371 million mobile internet users in the country. [5] Given the rapid pace of growth of internet users in India and a growing population, search traffic is bound to increase. If Baidu is able to create a localized search experience similar to what it is trying in China, it can attract users in India, thus tapping into the tremendous growth potential.
Regional Diversification Can Propel Baidu’s Growth
Baidu currently dominates the advertising search market in China and commands an 80% share in this market. While competition in the Chinese market is increasing with big players such as Google also looking to enter the mobile search market, Baidu can benefit from diversifying into other growing regions. Baidu is working towards transforming itself from a desktop based business to a mobile leader, given the high mobile penetration in China. We believe this strategy can help its growth in India, too. Mobile internet penetration is nearly 90% in China, [6] while there is a high potential for growth of mobile users in India. Baidu has undertaken several initiatives to maintain its market share in China such as “local express” which focuses on localized search with a huge network of SMEs. By integrating its product offerings, however, Baidu can benefit from other growing markets through acquisitions of key players as well.
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Notes:- India turns the battleground for US, Chinese e-commerce firms, The Hindu BusinessLine, November 20, 2015 [↩]
- India to overtake China’s population by 2022, – UN, BBC, July 30, 2015 [↩]
- Internet Users per 100 people, The World Bank [↩]
- India on course to overtake US next month in Internet user base, Livemint, November 30, 2015 [↩]
- India on course to overtake US next month in Internet user base, Livemint, November 30, 2015 [↩]
- There are 668 million internet users in China and almost all of them are using smartphones, scmp.com, July 2015 [↩]