Baidu.com. Heard of it? Possibly not, but Baidu is a $3 billion market capped internet beast in China with, according to Yahoo! Finance, over $125 million in cash. If you are of Chinese decent and live in Asia, chances are you know them very well.

Baidu listed on NASDAQ in 2005 and everyone who bought in won big. Google turned $5 million into a quick $60 million after buying and selling 2.6% of the stock from the IPO through to mid-2006. Quite a cheek to be making a profit from your competition. Unlike Yahoo! who had a chance early on (2002?) to buy into a cash-flow poor Google. Instead they went it alone to develop their own engine, took forever to do it and haemorrhaged market share losses to Google to the extent that markets are unsure if they will ever catch up. Oops.

Anyway, Google is 60 times larger than Baidu and it is very unlikely Baidu can ever become the global behemoth that Google is, it isn’t stopping them trying to win curry in other Asian language markets. Publicly announced in December, Baidu have vowed to enter the already crowded Japan internet space. Overconfidence from the success of the IPO, backed up by their wiping the floor with Google, Yahoo! Myspace, Youtube et cetera in China? Likely so, and time will tell. Though after talking to a number executives in the trade, it does seem Baidu are willing to push the limits on this one and they are aggressively talking to the top people in all the leading internet companies in Japan.

For the record, according to Alexa’s internet rankings at the time of writing, Baidu was 6th on the planet behind Yahoo (#1), MSN (#2) and Google (#3). Youtube and Myspace also come in the top 5. However to put this in perspective, Baidu is a Chinese language site, so being non-English, this is big. Needless to say, Baidu and it’s sites are the stand out leaders in China. Unofficially I have heard that Baidu has an enormous 60% market share in the search business in China, which is unfeasible anywhere else.

In Japan – I had to take a peek – the leading referral sites are Yahoo, Google, Mixi, FC2, Rakuten, Youtube, Livedoor, MSN in order from #1. Excite is way back at 25 and loads of the other ISP sites hang around that far and beyond. Check Alexa out if you like: www.alexa.com.

Can Baidu come into this crowded space and make money? Essentially this business is all about advertising revenue and how to get eyeballs on sites and ads, but can they compete with the home grown companies already slicing up the market? And then we have the global players like Google and Yahoo who have the lions share of all of this, add in Mixi, Myspace and Youtube who take out a lot of the multimedia and social networking markets. Also we have the content media companies like GMO and the listing companies like J-listing, X-listing, J-word etc who effectively “price” search words. It’s not like there is no competition for places here.

That being said, if you take the language strength of Baidu, they may have some advantage in double-byte character search. In Russia, I read in Red Herring a while back that a premier player in the search business is a Russian-language search site that makes a very strong showing up against Google and Yahoo! due mostly to it’s unique Russian “squiggly part” search capability. Sorry I can’t dig that article out as it is past midnight and past my bed time. You will have to Google it!

Recently it so happens that my job has had me bumping into a number of the internet people who have an interest in what Baidu plans to do. So naturally it comes up as a topic of delicate discussion. I don’t plan to divulge everything in case of a Stippy lawsuit and my notes are all at the office, but according to those in the know, Baidu – despite all it’s confidence and cash in hand – faces an uphill battle as there is not a single shining example of an internet search engine starting and succeeding from scratch or any point under $10 million market cap in Japan. Hmmm. That means they probably need to rethink the attack plan and look at a different space. However Mixi, Myspace etc already present major competition in other sectors. So maybe they will “buy in”. But who would be the target?

Another alternative exists, according to several of the exec’s I talked with. CEO of Baidu, Mr. Robin Li, a very clever and successful guy by any measure who learned this business at Infoseek, will likely have to offer some juicy pork belly for the Japanese internet folks to turn their heads. That pork belly being the Chinese market via a Baidu partnership.

Mikitani at Rakuten would be an obvious choice for wanting to partner up and head over to Beijing in a big way. Masayoshi Son over at Softbank is probably too tied up with Yahoo! to get into bed with Baidu as would Valuecommerce or Overture as examples, so who will it be? It will be interesting to watch.

By the way, Baidu (百度), literally meaning “a hundred times”, represents the persistent search for the ideal (a phrase taken from a Song dynasty love poem about searching 100 times to find someone). I can’t help thinking that “hundreds of times” sounds a little wasteful in the internet business where you only really get one shot.