Xiaomi maps route to competing with Baidu
- Xiaomi's quality phones are gaining share in a tough marketplace
- Xiaomi must develop an app with direct links to its smartphone’s services
- In China, mobile users have access to Google Maps but prefer Baidu
By Neil Flynn
Xiaomi is slowly but surely taking on the big boys in China’s tech space. Its Android smartphones are very popular here because their functionality is very similar to Apple, Samsung and HTC, whilst being significantly cheaper. Also, it is often referred to as the ‘Chinese Apple’ by consumers, which is an association that the firm will be more than keen to continue. Although the firm is still privately held, if and when it does list in the US, it will be a highly sought after IPO.
The most popular map application is Baidu Maps, which gets its content from NavInfo. This has been a growing concern for Baidu, because they face the risk that increased investment from Tencent in NavInfo could either lead to higher content costs, or perhaps even a termination of the partnership if Tencent decides to launch its own mapping service.
Their options remain rather limited, as switching map content supplier to Alibaba’s AutoNavi would result in the same situation. Likewise, switching to a lesser content provider would decrease the quality of Baidu Maps, whilst developing their own content either from scratch or by acquiring an existing provider. So whilst Baidu remains the most popular service, it is facing new competition from Xiaomi, which have taken a stake in Careland, which specialises in providing content for portable GPS devices.
However, this hasn’t been as successful as Alibaba had hoped, because merchants aren’t overly willing to advertise their exact location to consumers, which would make sense if a merchant possibly sells fake or poor quality products. Alibaba has since decided to allocate resources away from this O2O service, with AutoNavi focusing on map content for in-built satellite navigation systems in cars.
I have discussed previously about the importance for firms to build a mobile ecosystem, because it improves customer retention. Baidu’s advantage over its rivals is that it is a better service. So whilst Xiaomi phones will be equipped with the firm’s proprietary mapping service, Baidu will be expecting these users to download the Baidu Maps app. This has often been the case, as for example, Google Maps is very popular in the West for iPhone users, despite Apple having their own map application. Likewise in China, most people have access to Google Maps and/or Apple Maps, but continue to use Baidu Maps, because the service is better and they are used to it.
-- Edited by Adam Courtenay
Neil Flynn is head equity analyst at Chinese Investors