How Baidu Can Benefit From A Global Roll-Out Of Its Mapping Service
Baidu (NASDAQ:BIDU) is set to become a world mapping service provider, and the company will now cover 150 countries and regions. A dominant player in the Chinese market with more than 300 million monthly active users, Baidu is now looking to tap into the growing market of overseas Chinese travelers. Baidu Maps is a key mobile-based revenue generating product for the company, which enables local search and generates location-based advertising opportunities. This product also plays a key role in the company’s online to offline (O2O) business. While Google is the leading global maps provider, and could prove to be a tough competitor for Baidu in its international expansion, Baidu has a strong loyal Chinese user base which will work in its favor. The familiarity of the Baidu Maps app can encourage Chinese travelers to use the app while travelling overseas. This will ensure that Baidu’s loyal user base does not leave its platform during international travel and can attract revenues from advertisers in other countries. Further, it also gives Baidu the potential to tap into non-Chinese users, who might be looking for an alternative to Google Maps that is more customized to their needs. This move should aid Baidu’s international expansion and reduce its dependence on China in the long term.
Attracting Overseas Chinese Travelers
With economic growth and higher disposable incomes, international travel is on the rise for the Chinese population. The Pacific Asia Travel Association forecasts that nearly five million Chinese travelers will visit the U.S. each year by 2020, an annual growth rate of about 13%. China outbound travelers are growing and are poised to reach 234 million by 2020, from the 100 million figure for 2014. With an international expansion of its maps app, Baidu is well poised to generate some revenue from this audience. These Chinese tourists can be a huge market for Baidu internationally, since they may not be comfortable with Google’s app and prefer a more familiar service. By partnering with local merchants in other countries, Baidu can generate revenues by providing offline to online information on maps. This information can be customized to the requirements of Chinese tourists to ensure loyalty to the platform.
Building A Competitive Edge
Domestic competition for Baidu’s maps app is increasingly becoming fierce, with Alibaba-backed AutoNavi recently claiming that it has surpassed Baidu’s daily active users and become the no. 1 mapping service in China. Both mapping services are linked to several other services such as restaurants, entertainment and supermarkets and are critical for the online to offline services provided by both companies. With international maps and similar services in other countries, Baidu is trying to protect its turf in China and looking to increase customer loyalty. While Google remains the stronger player and technologically ahead of Baidu in the maps platform, Baidu’s familiarity to Chinese nationals should allow it to benefit from its expansion.
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