TikTok’s Parent Pushes Into Search Business in Threat to Baidu

(Bloomberg) -- When Google pulled out of the China market in 2010, it left local leader Baidu Inc. a de facto monopoly in the lucrative internet search business. Now that franchise is facing its most ominous threat yet.

ByteDance Ltd., an innovative Beijing startup that created the hit video app TikTok, is moving into search in a threat to the advertising business that has fueled Baidu's profit. ByteDance, known for aggressively recruiting top tech talent, is turning its attention to one of the most lucrative businesses online.

"From 0 to 1, we are building a general search engine for a more ideal user experience," according to a company post on the WeChat messaging service.

Baidu declined to comment. Its shares declined 2.2% in U.S. trading.

ByteDance likely won't create a standalone search engine, a Baidu- or Google-like site users would go to from a personal computer or smartphone, because that's not how most people in China use search. Instead, ByteDance's search will be embedded within its own apps, beginning with its Jinri Toutiao news service. That will allow users to quickly search for related news, information or products -- and ByteDance will be able to profit from search and display advertising.

The service will work with Douyin, the domestic version of TikTok, as well as ByteDance's popular video-streaming platforms. Staffers already include recruits from Baidu, Google and Microsoft Corp.'s Bing.

The Kids Use TikTok Because Data-Mined Videos Are So Much Fun

Zhang Yiming, ByteDance's founder, has begun to show the world his far-reaching ambition to create a global technology giant. After creating the popular Toutiao in China, he turned TikTok into a global hit, with fans from Beijing to Boston and Bangalore. The valuation of his seven-year-old startup has surged to $75 billion, more than any startup in the world. It's now looking to expand with more apps and its own smartphone -- one more reason a search service would be useful.

Baidu, meanwhile, has struggled with encroachment from larger rivals Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Robin Li, Baidu's founder and CEO, has seen his fortunes slide as the market value of his company has tumbled. The search leader is now valued at $38 billion, about half what it was two years earlier.

--With assistance from Shelly Banjo.

To contact the reporter on this story: Zheping Huang in Hong Kong at zhuang245@bloomberg.net

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Colum Murphy

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