Google, the fourth most trafficked Internet site in the world, has bought a minority stake in the seventh most trafficked site in the world, Baidu (Source: Alexa, 6/15/04). Baidu.com is China's leading Internet search engine serving up a database of over 300 million web sites.

Google, Inc. co-led the investment with Draper Fisher Jurvetson ePlanet Ventures' Asad Jamal, who is based in Redwood City, California. Additional participants in the financing were current investors Integrity Partners (Danville, CA) led by Scott Walchek and Greg Newman, who founded Inktomi's C2B, as well as Peninsula Capital (Menlo Park, CA) led by Robert E. King, who is also the founder and Chairman of R. Eliot King & Associates.

New investors include Bridger Management, China Equity, China Value, and Venture TDF.

The investment represents Google's latest move outside of the United States, and perhaps its last before going public later this year.

Beijing-based Baidu -- which means a "hundred times," a phrase taken from a Song dynasty love poem about searching 100 times to find someone, is China's most popular search engine, averaging tens of millions of text searches a day in Chinese alone. The country currently has 80 million Internet users, the world's largest group after the United States. By the end of this year, the market is expected to climb to 100 million Internet users, according to China Internet Network Information Center (CNNIC).

Robin Li, Baidu's Chief Executive Officer and co-founder, said "Today's announcement is a testimony to our strong growth and relentless execution in the Chinese market. With our new investor support, we plan to continue expanding our presence in China with additional services, and extending our reach into new markets."

Baidu CEO & co-founder, Robin Li

Baidu's flagship product, the Baidu Chinese Search Engine, is the fastest, largest, most relevant search engine with the freshest crawls in China. Baidu's services include algorithmic search, pay-for-performance, enterprise search, and a host of specialized services which include news, MP3, and image search.

On the content delivery front, Baidu has created the first caching technology focused specifically on the unique needs of the Chinese market. Baidu assists Chinese websites with the enhancement of delivery times through the enablement of both their content caching and intelligent routing. Baidu's caching software guarantees rapid, secure delivery of Web content to both PCs and wireless devices.

The company has also developed China's leading pay-for-placement service, whereby introductions are made between the users of Baidu's affiliate partners' sites and businesses that pay for priority placement in search results.

Alexa's two-year graph of Baidu's daily traffic rank helps illustrates the compelling story Baidu has to tell.

Baidu's Global Traffic Rank, Source: Alexa

Founded by Robin Li and Eric Xu in December 1999, Baidu became profitable in 2003.

The Company was set up in 1999 in California's Silicon Valley and was incorporated in the Cayman Islands. Today, Baidu is headquartered in Beijing with offices throughout China.

Co-founders, Li and Xu raised $1.2 million in their first round of financing and $10 million in their second round. Today's undisclosed investment enables Baidu to make significant steps forward in maintaining their dominance as the best Chinese search engine, and to make the Baidu brand even more dominant in China.

Thirty-six year-old, Li and forty year-old, Xu remain the biggest stakeholders in the company.

Forbes.com reported last December on those who made China's Top Ten Rich List. Last year, Li and Xu were tied with a number of others as the eleventh richest people in the country. It is possible, if not certain, that after today they will make Forbes' 2004 Top Ten List.

Baidu.com, Inc. is believed to have approximately 300 employees. Its Board of Directors include co-founder, Robin Li, Asad Jamal, Founder and Co-Chairman of DFJ ePlanet Ventures, and Integrity Partners' Scott Walchek and Greg Newman, whose Internet shopping company C2B Technologies was sold to Inktomi in 1998.

Li is a graduate of New York State University. After receiving a master's degree in computer science, he joined the Wall Street Journal's website to develop a real time financial information search system. Before returning to China in 1999 where he started Baidu, he also worked at Infoseek.

"Since its inception, Baidu has gained significant market share in mainland China with its products and services," said ePlanet Ventures' Asad Jamal. "The founders and the management team of Baidu continue to demonstrate extraordinary execution capabilities in delivering new products and attracting more users to their service."

"We will use our third round of financing to improve our products, services, technology and to boost our brand recognition," he said in an interview with The Wall Street Journal.

Baidu generates 80% of its revenues from selling search-specific links. The company also offers a pay-for-performance search, which allows businesses to be prominently displayed in search results by bidding for keywords. This service has grown to support 35,000 businesses ranging from real estate to retail to automotive.

Li said that for now, Baidu does not plan to build its own English-language Web site, although it might consider Korean and Japanese search sites in the future.

However, The Financial Times' reported today that Baidu is interested in working with its U.S. counterpart to foil "spammers" and to fight the proliferation of "spyware" software that gives access to Internet users' computers for commercial or illegal purposes.

The firm competes in the $100 million domestic market against Hong Kong-based search developer 3721 Network Software which Yahoo bought last year in a deal estimated at $120 million. Baidu also competes with Google, which operates a popular Chinese search site. Google introduced its own AdWords advertising service in two Chinese dialects this past February.

According to Shanghai's iResearch Inc., the search engine market in China will grow from last year's $60 million (500 million yuan) to $101 million (840 million yuan) this year.

Based on a recent independent market research study by iResearch, Baidu boasts 48.2% market share in local search, whereas Google, which has offered Chinese-language search since 2000, represents 29.8% of the market. 3721/Yahoo account for just 13% of the country's local searches.

At a Friends of the Children dinner in San Francisco this Spring, David Drummond, Vice President of Corporate Development & Corporate Counsel at Google, said he had been to China to meet with Baidu. However, he did not mention any deal in the making.

Google's David Drummond

Evidently, the deal had been brewing since the beginning of the year.

Google's Strategy & Upcoming IPO

A Google spokesman confirmed the investment today, but declined to offer any more specifics on the Mountain Valley, California, company's strategy in China.

In the S-1 statement Google filed for their initial public offering, the firm states, "Expansion into international markets is important to our long-term success, and our inexperience in the operation of our business outside the U.S. increases the risk that our international expansion efforts will not be successful."

On April 29th, Google filed for a $2.7 billion public offering. Morgan Stanley and Credit Suisse First Boston were selected as the company's lead underwriters. Since then, twenty-nine additional underwriters have been added to the offering. They include: Ameritrade; E-Trade Securities; Goldman Sachs Group; Thomas Weisel Partners; WR Hambrecht & Co.; Allen & Co.; Citigroup; J.P. Morgan Chase & Co.; Lehman Bros. Holdings; UBS Securities; Deutsche Bank Securities; Lazard Freres & Co.; Merrill Lynch & Co.; M.R. Beal & Co.; William Blair & Co.; Blaylock & Partners; Cazenove & Co.; Epoch Securities; Fidelity Capital Markets; Harrisdirect; Needham & Co.; Piper Jaffray & Co.; Samuel A. Ramirez & Co.; RBC Capital Markets Corp.; Muriel Siebert & Co.; SunTrust Robinson Humphrey; Utendahl Capital Partners; Wachovia Capital Markets; and Wells Fargo Securities.

Google plans to hold a Dutch-auction sometime later this summer or fall. Their IPO is expected to be one of the largest and most talked about stock-market debuts in history.

The Benefit of Google's Investment in Baidu

Robin Li said Baidu hopes its alliance with the California-based search engine giant would help improve the Chinese company's technology, build up its brand name and expand its market share with both customers and global investors.

After investing in privately-held and publicly-traded companies for forty years, Baidu's Series A, B and C investor, Robert King said his enthusiasm for Baidu reminds him of the day he bought stock in a four-person young company called Relational Software Inc., later to be renamed Oracle Corporation. King said, "Robin has a strong management team and and now a key strategic partner. The team is only going to get stronger with this new round of investment."

King added, "Robin has done a fabulous job developing the dominant search engine in China. This new round of investment will enable Baidu to continue to innovate, adding to its portfolio of technology-rich services."

"Our ultimate goal is to list on the Nasdaq, but we have no concrete plans at this time," Baidu CEO Robin Li said.

About Draper Fisher Jurvetson ePlanet Ventures

Draper Fisher Jurvetson ePlanet Ventures is a global venture capital firm focused on early-to-late stage investment in the information technology and life sciences sectors in Asia (China, India, and Pacific-Rim), the United States, and Europe. DFJ ePlanet was founded in 1999 by ePlanet Ventures chairman Asad Jamal in partnership with the leading Silicon Valley based venture capital firm, Draper Fisher Jurvetson.

For more information visit: DFJPlanet.com.

About Baidu

Baidu's services include algorithmic search, pay-for-performance, enterprise search, and a host of specialized services which include news, MP3, and image search. Founded in 1999 by Robin Li and Eric Xu, Baidu is the leader in China with the world's largest Chinese web page index of over 300 million pages, providing the fastest, most reliable and relevant search results, and offering a wide variety of search-related products and services for businesses and consumers. Baidu is headquartered in Beijing with offices throughout China.

For more information, visit: Baidu.com.

Congratulations Google, Baidu, Robin, Eric and those who are inspired by Baidu's story!

Other Articles About Google in RuggedElegantLiving.com:

04/29/04, Google's Sergey Brin & Larry Page Prepare for Dutch Auction IPO

04/29/04, Google Files to Go Public