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Baidu on the hunt for Canadian game developers

Young employees at Chinese flagship Internet company Baidu walk around giant pod-like rooms for sleeping and resting at the company's headquarters in west Beijing.

Sim Chi Yin/The Globe and Mail

As mobile gaming becomes increasingly popular in China, Baidu Inc., China's biggest search engine company, is visiting Vancouver and Toronto to see if it can strike productive relationships with Canadian game developers.

Baidu, which is listed on the Nasdaq with a market capitalization of more than $66-billion (U.S.), accounts for around 70 per cent of Web searches in mainland China. But the company also operates a mobile gaming platform that sees upwards of 100 million application downloads a day.

Cheng Wei, the vice-president of international business at Baidu Mobile Games, says he met with more than 20 game developers in Vancouver – a hot spot for animation and mobile game-developers that has attracted multiple Japanese gaming giants – and says he will meet with more in Toronto. Baidu has more than 40 per cent of China's games market on the Android smartphone platform, and Mr. Cheng wants to make partnerships in Canada that could result in bringing Canadian-made games over to Baidu's popular platform, at a time when the sector is becoming hotly competitive.

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But he says that if western game companies want to find success in the Chinese market – where more than 300-million people play mobile games – they will have to make their games smaller. Only 20 per cent of Chinese mobile phone users have access to stable WiFi networks, he says, which means about 80 per cent of Chinese users will be relying on a mobile data plan to download the games – and won't bother downloading anything too big.

"Some of the games developed in North America, Europe and even Japan do not take into account size," Mr. Cheng says. "These games are not suitable for the Chinese market. At least for now."

Most of the best-sellers in China are between one megabyte and 80 megabytes, he says. Although many apps, such as some Angry Birds games, conform to that size, many don't: Electronic Arts' Monopoly app is 271 megabytes, for example, while Grand Theft Auto 3 is more than 1.2 gigabytes – sizes that would be too large for anyone who has to rely on 3G wireless networks and a monthly data plan.

China's mobile game market, like its mobile phone market more generally, is seeing explosive growth: Year-over-year sales growth in the first quarter of this year was 40 per cent, amounting to roughly $705-million, according to J.P. Morgan data. Mobile earnings now account for roughly 10 per cent of Baidu's total revenue, Mr. Cheng says, with most of that coming from in-app purchases on Baidu's mobile games platform. In the first quarter of 2014, Baidu's revenue was more than $1.5-billion, up 59 per cent year-over-year.

"We want to generate more revenue from mobile games," says Mr. Cheng, who notes that he has been assigned to scour international markets for popular games and skilled developers to help give Baidu an edge.

That's mainly because the competition has become increasingly intense. Chinese firms such as Baidu, Qihoo 360, Tencent and others – which grew during occasional or permanent government censorship of sites such as Facebook, Google, Twitter and YouTube – are now battling in various online arenas as they all expand, from search to security, to mobile games.

The companies regularly take one another to court in China over alleged unfair practices, such as stealing code or abusing their market position. Qihoo, an anti-virus software company that has expanded into search and competes with Baidu in China's mobile game space, has been forced to pay fines and issue apologies to both Baidu and Tencent, which operates a messaging platform called QQ that has more than one billion users.

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