If Facebook Deal Is Dead Baidu Will Need To Buy A Social Strategy

• Posted by bbishop
• on July 13th, 2011

Baidu ($BIDU) has not been able to leverage its near monopoly in search into success in the social web.

Baidu’s latest social failure is Baidu Shuoba, its Weibo-like clone that the company billed as a real name social networking platform. The service never got traction, Baidu reorganized the team a few months ago, and Wednesday we learned that Mai Tian, the head of Baidu’s social efforts and the architect of Shuoba, is leaving the company at the end of July.

Baidu has an even weaker social position than does Google (though with the rate of uptake of Google+ perhaps Google will eventually figure out social.) Google has hundreds of millions of Gmail users on which to base its social efforts. Baidu has resisted launching an email service and its Geocities/Myspace-like Baidu Space has never been a leader, so it has relatively little user loyalty on which to build.

Baidu needs a social play, and given its repeated internal failures the company will likely look to buy its way into social either through a joint-venture with Facebook, an outright acquisition or a controlling investment as they did with travel search firm Qunar.

I am hearing murmurs that the long-rumored Baidu-Facebook JV is dead, and if that is the case Baidu will need to use its cash and/or stock to buy its way into a credible social strategy.

Sina and Tencent control the best social assets in China. Short of a huge, multi-billion dollar and unlikely deal for Renren (current market cap is $4B +), the probable candidates for a deal with Baidu may be:

1. Kaixin001. Kaixin001 was once the leading white-collar SNS but has seen its growth and IPO prospects severely curtailed by the rise of Sina Weibo. It is now mostly a social game platform, and any deal with Baidu could be difficult given that Sina is an investor in Kaixin001. It could be a fast way for Baidu to gain a credible social presence, and Baidu’s traffic hose might reverse Kaixin001′s decline, but the white-collar users tend to not have a positive attitude towards Baidu and even more might defect under new ownership;

2. 51.com. 51.com was once a hot SNS but has fallen into a Myspace-like trajectory. Its users likely have less dislike of Baidu and Baidu might be able to turn it around given its ability to drive so much traffic. But like a Kaixin001 deal, Baidu would be making a risky bet on its ability to revive a declining asset;

3. Douban. Douban is probably the most interesting SNS in China right now. It has innovative services, has attracted a lot of funding, is loved by elite users and is still growing. Some of those users might defect from a Baidu-owned property, but a deal could add innovation and a “cool factor” along with a valuable SNS asset.

Baidu’s $300m investment in Qunar showed a willingness to make a huge bet on a company succeeding in an area Baidu considers strategic. Given the importance of social and Baidu’s repeated failures at developing homegrown social services, it is hard to see how Baidu will not have to make a big deal to catch up.

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