How Baidu Won China

(page 2 of 7)

While Li has earned the grudging respect of Google execs, Baidu's tactics are a sharp contrast with the Google founders' sincere, if not always sincerely observed, slogan: Don't be evil. If crawling the Web empirically and without commercial bias is the moral duty of a search engine, Baidu is, at least in the eyes of its competitors, not a moral company. For years legions of advertisers have complained on Chinese Web forums that Baidu secretly penalizes the search rankings of websites that decrease their spending on Baidu. Archrival Chinese Internet company Alibaba, Jack Ma's Internet conglomerate that runs the Taobao e-commerce site and is 40 percent owned by Yahoo, says Baidu unfairly penalizes the search ranking of companies that accept ads from some Taobao merchants.

Robin Li disputes these allegations, saying the company never links search results and advertising. "We have a Chinese wall within the company" between the search and ad teams, he says, without irony. "These are all conspiracy theories. In reality we have no incentive to do that. Paid search is proven, and we are very confident we will be able to make a lot of money by doing the right thing for users and advertisers." Many Chinese are nonetheless quick to believe the worst about Baidu: In 2008 the company quickly denied Internet chatter claiming it had taken money from Sanlu Group, a dairy producer that had sold milk powder tainted with the toxic chemical melamine, to keep the scandal out of search. At least six children died and more than 54,000 were hospitalized. Baidu has conceded that it has sometimes been too lax in policing its advertisers. In late 2008 the company acknowledged it had prominently listed ads from medical companies that weren't properly licensed, though Greg Penner, an early investor and Baidu board member who also serves on the board of Wal-Mart Stores (WMT), points out that no one in the Chinese search industry was vetting these advertisers.

One more denial: Baidu says it is not a kingdom built on Internet piracy, though music companies say its popular MP3 service allows users to download just about any song ever recorded for free. The recording industry sued in 2005, but Chinese district and appeals courts sided with Baidu, which says it's merely giving users the content they want by linking to popular music websites.

For many people outside China, these issues are minor compared with censorship. Like all Chinese Web companies, and Google's Chinese language site until this year, at the behest of the Chinese government Baidu blocks pornography or references to topics such as Taiwanese independence, the Dalai Lama, and the 1989 Tiananmen Square massacre. The practice is called zi lu, or "self-discipline," and Baidu does it well. Last year the company accepted one of 20 awards from the Internet Society of China, given for what the group calls "industry self-regulation."

Li, the fourth of five children born to factory-worker parents in Yangquan, a city of 1.3 million in northern China, received his bachelor's degree from the prestigious Peking University in 1991, and got a master's in computer science from the State University of New York at Buffalo in 1994. He has spent years in America, and speaks flawless English. His fidelity to China is nevertheless unquestioned. Li says that Baidu manipulates search results to obey the law of the land and that failing to comply would risk its license to operate in China and let down users and investors. "If the law clearly prohibits certain types of information, be it porn, or anti-government information, then I'm sure there's a reason for it," he says a few days before the Baidu World event, while sitting in the rooftop rock garden at his company's new headquarters, a 91,500-square-meter building (complete with a gym, yoga studio, and nap rooms) in the city's bustling Shangdi district. Of censorship broadly, Li says: "I'm an entrepreneur. I'm not a politician. I should not be in a position to make this kind of a call."

Business Exchange

Track and share business topics across the Web.