On a smoggy August morning outside Beijing's China World Hotel, Li Yanhong's fan club is assembling. "We'll use his English name, okay?" a wrangler shouts over the chattering teens and twentysomethings. A black car approaches, its door opens and the masses do as they're told. A boyishly handsome 41-year-old executive steps out. "Robin! Robin!" scream his followers, hoisting led-encrusted placards for a few obliging paparazzi.
In his keynote at the Baidu World conference a few hours later, Robin Li will describe to a crowd of thousands how the search engine he created ten years ago is becoming China's gateway to the world of information. Then he'll parade across a stage surrounded by smiling children as "Twinkle, Twinkle, Little Star" plays in Mandarin and soap bubbles fill the room.
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Li has earned his share of Olympic-style marketing. In ten years Baidu has gone from startup to 7,000 employees strong, valued at $11 billion. Li has blunted Google's invasion of China and become a national symbol of China's burgeoning identity as a global Internet player. As China's digital population has grown to 338 million Internet users, Baidu has racked up 8 billion monthly searches and 145 million unique monthly visitors, according to ComScore, making it the most popular non-U.S. site in the world.
This marks Baidu's first appearance on the Best Under a Billion list. Revenue has grown 29-fold in four years, reaching $462 million in 2008 and $151 million in profits. Li's personal stake has swelled, too, to $1.8 billion by FORBES' estimate. That made him the seventh-richest person in China last year.
"A lot of Chinese people have wondered if knowledge really means power in today's market economy," Li says during an interview with FORBES in Baidu's no-frills Beijing office. (By year-end the company will move to a new headquarters designed to resemble an enormous search box.) "I think I've proven that it does."
Li will need every scrap of knowledge and power, however, as challenges to Baidu mount. Google has begun to whittle away search market share. China's e-commerce giant, Alibaba, has declared a war over online shopping. And Baidu's own practice of mixing advertising and search results with little distinction has taken a toll, generating revenues but leaving some worrying that the company puts profits ahead of its users' best interests and even their safety.
That has spurred Li to put Baidu through what may be a wrenching transition, a switch to a new advertising platform that clearly distinguishes paid-search ads from other results. Code-named Phoenix Nest, the initiative faces a tough task: eliminating or reducing Baidu's controversial ad practices without choking revenue growth.
"Even if this means we have to suffer for a few quarters, I'm willing to make that bet--or sacrifice--to make sure we're moving in this direction," Li says in stiff but fluent English. "It's not an easy decision for a CEO. But if we imagine the company ten years down the road, it's an obvious one."
Baidu's scandal streak began last September, when dairy products sold by Sanlu Group, based in the northern Chinese city of Shijiazhuang, were found to contain kidney-damaging melamine. As China's panicked parents searched for a safe source of milk, a PowerPoint file surfaced on the social networking site Tianya, purporting to be an internal Baidu document that showed the search engine had accepted money from Sanlu in exchange for filtering incriminating links from its search results. The file was impossible to trace or verify. But the story echoed around the blogosphere and was later picked up by Alibaba, which displayed the accusation prominently on its home page. Baidu vehemently denied the charges and threatened to sue Alibaba for defamation until the company removed the reference later that month.
A month later, in November 2008, a state-run cctv news show ran a two-part exposé on Baidu's medical advertisements, revealing that several ads on the site had been paid for by quack doctors, nonexistent hospitals and unregistered pharmacies. That program put a spotlight on the too-faint line Baidu drew between ads and search results, marking paid results with only a small "promotion" tag. Such blurring frequently confuses users and so has been shunned by Google and others.
