Cloud computing gives Baidu mobile edge

Baidu, China's largest search engine operator, is boosting its cloud computing service in an effort to maintain its dominance of the mobile Internet sector.

At its annual technology innovation conference in Beijing last week, Baidu said it will start to offer data storage and processing on the web instead of on actual servers to web-based application developers free of charge.

The company will allow outsiders to include its own module, including applications like map software, on their products to help them build based on Baidu's existing service.

Market watchers said the offer could benefit smaller developers who have limited resources.

The search engine remains the most popular feature for Internet users in China. However, an increasing number of smartphone users are accessing the Internet through mobile phone applications to read news and exchange information with friends.

Baidu Chief Executive Officer Robin Li said queries from smartphone applications at the search site surged 10-fold in the past year.

However, mobile-based services comprise so little of Baidu's income at present that they aren't broken out in the company's quarterly earnings.

The value of China's mobile Internet market is expected to reach 73.8 billion yuan (US$11.6 billion) by the end of this year, with advertising income of 5.7 billion yuan, nearly double a year ago, according to a research report by Data Center of China Internet.

An increasing number of players are entering the market, but most mobile Internet applications have yet to turn a profit.

Consumers are bombarded with loads of applications, making it hard for any particular software to stay on top for more than several months. Smaller applications aimed at particular target groups barely get a notice.

Making use of Baidu's computing capacity means smaller and medium-size developers won't have to pay for servers and other hardware facilities.

Baidu has launched mobile phone software based on its search products, including maps, music streaming and photo editing. Earlier this year, it also collaborated with domestic handset makers to pre-install its Android-based smartphone operating system to boost traffic on mobile devices.

But these initiatives apparently weren't enough to address a wider array of consumer needs, not to mention the various smartphone models with different operating systems.

Baidu will allow developers access to its cloud computing facility, such as remote online data storage and virtual application testing facilities, to make sure software can run smoothly on different types of operating systems.

Baidu Chief Financial Officer Jennifer Li said the company will invest 10 billion yuan to build cloud-computing facilities. That includes a 4.7 billion yuan facility under construction in north China's Shanxi Province that will be put into use in four years.

"We've been working hard to study individual web users' habits and search demands, and now we'll work more closely with developers," said Li Mingyuan, general manager of Baidu's Mobile and Cloud Computing division.

Baidu's plan is to appeal to more users by joining hands with a group of applications makers instead of coming up with its own software on the mobile Internet. By doing so, it hopes that netizens who have been using its site to search for news and online interest groups will stay on the site to look for mobile phone applications.

More application programming interface will be opened for developers early next year, including payment modules that will allow smartphone users to pay for applications they have downloaded or for value-added services within applications, such as games.

Baidu surely won't be doing all this for free. Vice President Wang Jin said the building of cloud computing infrastructure is just the first step.

Next, he said, the company will work on distribution platforms for applications and then will help developers find profitable business models, including building a payment system suitable for use on smartphones.

He estimated that online advertising revenues related to web-based and smartphone-based application developers will triple this year as an increasing number of partners seek to work with Baidu.

This strategy could signal a potential shift in Baidu's revenue stream.

Baidu is seeking advertising income from paid search links from web developers beyond advertisers.

"The free capacities offered by Baidu are a nice way to appeal to smaller and medium-sized developers who lack channels to attract visitors," said Analysys International researcher Sun Peilin.

Also, these developers will serve as potential advertisers for Baidu, he added.

Whether the strategy ultimately works or not in the fast-changing mobile Internet market depends upon what benefits developers actually see in the capacities Baidu is now offering.