Baidu bets on smartphone app platform to boost presence

Baidu Inc, the biggest Internet search provider in China, launched a new mobile application distribution platform on Thursday that allows smartphone owners to use apps without downloading them.

Company executives hope this "revolutionary" service will put Baidu back in the game in the mobile Internet sector, where the Beijing-based giant is losing its edge.

The mobile search product, called Light Apps, enables mobile users to access third-party apps through Baidu's search software on mobile devices. Baidu is adding more services, including online payments, travel guides and music, to Light Apps.

"The traditional app store model has a fundamental flaw because it only benefits a few popular apps, while a huge number of small developers are finding it hard to survive," said Robin Li, chairman and chief executive officer of Baidu.

Baidu's app distribution platform mainly serves devices running on Android, a dominant operating system in China.

A few hundred apps at the top of the pyramid account for 70 percent of the downloads, while lower-ranked apps have to fight it out among themselves for the remaining 30 percent, Li said, adding that Baidu's new service will create a fresh business model for the industry.

The product may also serve as an important revenue contributor for Baidu, which needs a wider variety of ways to earn a profit, analysts suggested.

"Baidu still heavily relies on advertising for income, but its competitors are quickly expanding their earnings sources in the mobile Internet market," said Dong Xu, an analyst at research house Analysys International.

It's clear the company is trying very hard to build its mobile arm to defend its leading position in the mobile sector, but the efforts have yet to bear fruit, according to Dong.

Virtually all of the company's 7.56 billion yuan ($1.23 billion) in second-quarter revenue came from online advertising, the company's financial statements show.

The nation's mobile Internet sector rapidly expanded this year, creating a brand new market for Internet companies.

The mobile Internet population grew by nearly 44 million users in the first half, lifting the total user base to 464 million, data from the China Internet Network Information Center show.

However, analysts warned that with other players quickly expanding their presence in the mobile sector, Baidu could fail to navigate the shift to the mobile Internet business.

"Baidu has to invent its own ecosystem in the mobile sector as soon as possible, because companies are trying to grab each other's territory in the emerging sector," said Wu Hequan, council chairman of the Internet Society of China.

New business models, such as Light Apps, may help the company break through the gates to the mobile era, he added.

Baidu said its mobile platform adoptions "gained momentum" and mobile monetization improved in the second quarter. For the first time, mobile revenue accounted for about 10 percent of the total in the past quarter.

Last month, the company acquired China's top app store, 91 Wireless Websoft Ltd, for about $1.9 billion. The deal was the most expensive in the nation's Internet history.