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By Wang Xing (China Daily)
Updated: 2008-03-01 09:18

The Chinese search engine Baidu Inc said on Friday it has started a beta test for its instant message (IM) product, marking the company's formal entry into China's IM market.

A Baidu booth at a Shanghai exhibition.The Chinese search engine Baidu Inc said on Friday it has started a beta test for its instant message (IM) product, marking the company's formal entry into China's IM market.[China Daily]

Baidu said on Friday in a press release it has started internal tests of its IM product "Baidu Hi", which only Baidu employees who have submitted applications through internal networks can get approval to download.

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"IM is one of Baidu's few 'strategic' products and it has been developing it for over a year," a company statement said.

It refused to disclose the scale of the test, or when the test will be over.

Since last year, rumors have been rife that Baidu has been eyeing the IM market in the hope of finding another revenue generator outside its online search business, in order to maintain rapid growth.

Earlier this week, the company posted recruitment advertisements on its website seeking IM talent.

A Baidu spokesperson said the company does not have a schedule for launching its IM service.

IM is a text-based communication tool for people on the Internet. It is crucial for Internet companies as it generates loyalty to a provider and its services.

Tencent, a Shenzhen-based company that runs the QQ platform holds about 80 percent of China's IM industry.

The company has 580 million registered users and earned 1 billion yuan in the third quarter of last year, mainly through providing Internet value added services.

Microsoft's MSN is a distant second and attracts many white-collar workers.

Liu Bin, an analyst at research firm BDA China, said Baidu's entry into China's IM market will not trigger direct competition with Tencent and Microsoft in the short term because it will be difficult for Baidu to attract users from other providers.

"Baidu's IM software will have a significant impact on Tencent and Microsoft in the next two to three years," he said.

Since 2005, Baidu has posted annual growth rates of over 100 percent. But Liu said the company's growth rate may decline to 30 percent within five years due to a larger revenue base.

"Although IM may not bring direct revenue for Baidu in the short term, it will be lucrative if Baidu can combine it with other services."