Can Baidu Benefit From Its Alliance With Amazon?
Earlier in December Baidu (NASDAQ:BIDU) announced that it will be the default search engine for Amazon’s Kindle and Fire Tablet in China. [1] As part of this strategic partnership, Baidu will offer the search feature and apps, as well as online video streaming options, on Amazon’s tablets in China. We believe in the long run this alliance can help Baidu strengthen its already dominant search engine position in China and give it an edge in China’s e-commerce market, which is dominated by Alibaba. Amazon is trying to expand its footprint in China and as the company grows in the region; its partnership with Baidu will give the latter the e-commerce push it needs, as it builds its marketing and transaction services platform.
See our complete analysis of Baidu here
Kindle’s Popularity Can Pave Way For Other Services
Amazon stated that it has millions of Kindle e-readers in China and is confident of the success of its Fire tablet in the region. Although the exact number of Kindle users in China has not been revealed, reports in July 2013 when Amazon released its Kindle Paper White and Kindle Fire HD in China stated that the devices were sold out “almost immediately”. [2]. On the launch of the Fire Tablet, Amazon stated that it received millions of orders from its Chinese customers, but did not reveal exact numbers. [3] The partnership with Baidu will provide Fire users access to a wider range of mobile apps and this can make them more popular. If Amazon succeeds in capturing a significant chunk of the Chinese market, it could introduce other services such as Amazon Prime in the region. Amazon’s expansion in China can benefit Baidu as it stands to gain a wider audience in the region for its applications and online video service. While we estimate more than 70% of Baidu’s valuation to come from its Search Advertising Division, the company aims to build an online marketing and services platform, which will create a seamless user experience of discovery, service and payment using Baidu’s several offerings. As the company tries to merge its services with its search discovery engine, it can benefit from the partnership with Amazon in the long run.
As Google still works on its re-entry in China, Baidu continues to enjoy a near monopoly in the China search market. The partnership with Amazon will strengthen this position and as Amazon expands its footprint in China, Baidu’s integrated offerings platform can get a boost.
Notes:
- Deals accelerate Baidu expansion, Taipei Times, December 4, 2015 [↩]
- Amazon Kindle is an early hit in China, opening new doors for Bezos &Co., Geekwire.com, July 2013 [↩]
- Amazon.com Inc, collaborates with Baidu Inc (ADR) to crack Chinese E-commerce Market: Potential threat to Alibaba group, Chinabusinessnews.com, December 4, 2015 [↩]