Chinese Web Search Giant Serves Two Masters

BEIJING — A government official’s X-rated photos appear on the Internet and immediately go viral. Online traffic spikes as Web users hunt for the images with gleeful schadenfreude.

When Representative Anthony D. Weiner’s anatomy dominated headlines in the United States this summer, the curious headed to search engines like Google or Bing to see more than usual of a U.S. politician. But when screen shots from a Web cam, showing a bureaucrat from the southern Chinese city of Guangzhou in a state of undress, hit the Web in late June, the majority of those who wanted to catch a glimpse of his naked body turned to Baidu, China’s most popular Internet search engine.

With an 84 percent market share, according to iResearch, Baidu can see exactly what most of China’s 450 million Internet users look for online, be it the latest political scandal, pop tune or movie schedule. And it is a formidable opponent for other companies, as Google can testify after scaling back its operations in China last year.

But despite its redoubtable position, Baidu finds itself faced with a thorny challenge — keeping both the technocrats in Beijing and the financial analysts on Wall Street happy at the same time.

The company has gained a reputation in the West for censoring search results, as well as for its tussles with major music labels over its controversial practice of “deep linking” to pirated music tracks hosted on other Web sites. In February, the U.S. trade representative named Baidu as one of the world’s “notorious markets” for piracy and copyright infringement.

That outside stigma has not stopped Chinese courts, Internet users and investors from siding with the search engine, which is based in Beijing. Since Google began directing mainland Chinese Web users to its Hong Kong site in March 2010, Baidu’s market share has soared and its share price has more than doubled.

Despite that success, growing pressures within China have driven Baidu to move toward offering a more legitimate basket of services. After Google’s departure, Baidu signed licensing agreements with Chinese songwriters and book authors. Those moves have raised the question of whether Baidu has chosen to turn over a new leaf on copyright issues.

But rather than repenting, the company may just be trying to expand without drawing the ire of the Chinese government.

Baidu scrubbed 2.8 million copyright-infringing works from its online library service, Wenku, just days after the Chinese National Copyright Administration announced that it was investigating the company for infringement of copyright regarding books.

A few days later, Baidu announced it had made a licensing deal with the Music Copyright Society of China, the country’s official performing rights organization, which would distribute fees to composers and lyricists for each song downloaded or streamed through the company’s Web site, putting an end to years of litigation. The organization successfully sued Baidu last year over unauthorized lyrics to 50 songs that were available on the company’s servers.

“I hope this cooperation between Baidu and M.C.S.C. will set up a model for search engine companies to solve copyright problems with rightholders,” Qu Jingming, the organization’s secretary general, wrote in an e-mail.

Baidu’s domestic legal setbacks have been interpreted as reflecting the Chinese authorities’ growing intolerance of copyright infringement. With Google out of the picture, Baidu has increased its hold over Internet searches. But it has lost some of the Chinese government’s support because there is no longer the threat of a foreign company gaining ground in the politically fraught realm of online information, analysts say.

Now, as Baidu grows more dominant with no real rival in sight, the Communist Party may increasingly see Baidu’s near-monopoly as a cause for concern.

“Baidu’s biggest enemy is itself,” said Duncan Clark, chairman of BDA China, a technology consultancy. “Now that it has vanquished the bogeyman, it’s gotten so large it’s bumping up against the Party.”

Article source: http://www.nytimes.com/2011/07/18/technology/chinese-web-search-giant-serves-two-masters.html?partner=rss&emc=rss