Dear Shareholders,
2008 was a year of exciting developments in Baidu's business on many fronts. It was also a year of meeting - and overcoming - new challenges, both internally and externally.

We understand that as a rapidly growing company in a nascent industry we must be flexible and prepared to evolve in the face of unexpected challenges such as those we experienced over the last year. I can say with confidence that in facing these challenges we have emerged as a stronger company. Today, Baidu is a force which drives the development of the Chinese Internet and a market leader committed to promoting increased understanding of the Internet among both users and customers.

Effectively leveraging our scale and influence to serve both users and customers
China has over 300 million Internet users and the majority of them are users of Baidu's search engine services. In 2008, we expanded our customer base to include approximately 300,000 online marketers. Baidu is the undisputed market leader in China's Internet search market.

We understand that it is our shareholders, online marketing customers, partners, employees and, above all, China's vast number of Internet users and small and medium enterprises (SMEs) that have brought us to the leading position we now enjoy.

It is our responsibility to each of these constituencies that keeps us focused on our core mission of providing the best Chinese-language search experience. More than just a business model, this reflects our vision of the Internet - and search in particular - as a powerful influence in China's ongoing transformation: improving lives, empowering businesses and opening up new vistas of knowledge and opportunity.

Giving back to society and being a good corporate citizen are important parts of this vision and we were proud that Chinese netizens turned to Baidu for information during critical situations in 2008. For example, people used Baidu Postbar, Baidu Space, HA0123 and Baidu News to spread useful information about the Sichuan earthquake last May, which helped the rescue effort. And during the Beijing Olympics, people stayed up-to-date by using Baidu to find information about medal counts and results of their favorite competitions.

Whether allowing students from all over China to access online resources, bringing opportunities to businesses, giving even the most isolated groups access to the rest of the world, or developing a search platform especially designed for China's population of senior citizens, we are always looking for ways to draw upon Baidu's strengths to empower peoples' lives and bring real contributions to Chinese society.

Innovating for a better tomorrow
As those of you who have followed us since our IPO know, central to our success has always been our focus on developing the best Chinese-language search products and technologies that are most suited to the needs and requirements of our local search users and online marketers. For this reason, we have always invested substantially in R&D.

2008 was no exception, as we worked to take our offering to the next level through increased search relevance, a more comprehensive indexed database, enhanced search user interface, and better delivery of results.

With our understanding of both the dynamic Internet eco-system and of our online marketing customers -for whose business success the Internet is becoming increasingly central -- we have focused on providing the most sophisticated platform to enhance online marketing customers' ROI with advanced tools to analyze, strategize and manage advertising spending. On this front, we most recently introduced Baidu Professional Edition, also known as Phoenix Nest, a major step forward in both our offering to online marketers as well as in Baidu's ability to monetize search user clicks.

Looking back over Baidu's history, it is quite something to think that what started out as a simple web search service has now grown to include over sixty individual services that fulfill diverse user needs. As I've said, this focus on users is the root of our success, and our passion for developing innovative ways to enhance the Baidu search experience is as strong as ever.

In December of 2008, we began the rollout of Project Aladdin to enhance the comprehensiveness of our search results. As part of Aladdin, we intend to improve the efficiency of data pickup by working with webmasters to extract factual data that our users are looking for and make the data searchable via our search engine. Also, as the leader in Chinese Internet search, Baidu has a significant ability to cross sell to our network of search users with more focused search services and new communitybased products as well as our new C2C e-commerce platform.

Strong leadership to capture opportunities
In 2008, a major task was to continue building a management team that would be strong and experienced enough to lead Baidu as we grow into a global company. I am happy to say that by the end of the year, our senior management team was complete. Our new chief financial officer, Jennifer Li, comes to us from GMAC financial services, where she served as Controller of GMAC's North American operations. One of her primary focuses will be to implement strategies to ensure Baidu' s stable growth. Peng Ye, our new chief operating officer, also comes with extensive experience having previously worked for Apple, overseeing its China operations.

We are also pleased to welcome Yinan Li, an industry veteran with sixteen years of directorial experience including, most recently, serving as chief telecommunications scientist and vice president of Huawei Technologies. With his rich experience, Yinan will be ensuring we stay ahead of the innovation curve and that we leverage synergies across our product portfolio. Since their arrivals, our senior managers have been making significant contributions to the company's internal controls as well as business growth.

Beyond enhancing and increasing our range of search products, we are also expanding Baidu's scope of operations. We officially launched a Japanese-language search engine in January 2008, and within its first year Baidu.jp became the fourth largest independent search engine in Japan.

Notably, Toshikazu Inoue joined as President of Baidu Japan in August of 2008. Mr. Inoue previously worked for Yahoo! Japan where he served as vice president of search business, responsible for product research and development. His extensive experience in Japan's search market and his passion for search technology makes him the ideal person to lead our operations in Japan.

In conclusion, 2008 was a year of new experiences for Baidu, and as I reflect on the events from the year I am proud of our ability to overcome the external and internal obstacles we faced to become a stronger and more mature business. Of course, 2009 brings a new set of challenges - a difficult macro-economic outlook, continued competition, and the task of meeting our own ambitious goals for the year - but we are more confident and excited than ever about our ability to realize Baidu's potential.

On behalf of Baidu's management team, I thank you for your ongoing support of Baidu.
- Robin Li

Download Baidu.com 2008 Annual Report

PDF format, 3.4MB, 150Pages.

Baidu.com 2007 Annual Report

Visit Baidu.com, Inc. Website

About Baidu.com:

Baidu.com, Inc. (Baidu) is a Chinese-language Internet search provider. The Company conducts its operations principally through Baidu Online Network Technology (Beijing) Co., Ltd. (Baidu Online), its wholly owned subsidiary in Beijing, the People’s Republic of China. In addition, it conducts part of its operations through Baidu Netcom Science Technology Co., Ltd. (Baidu Netcom), which holds the licenses and approvals necessary to operate Baidu’s Websites and provide online advertising services.

In November 2007, Baidu established Baidu (Hong Kong) Limited (Baidu Hong Kong), a wholly owned subsidiary in Hong Kong, which became the sole shareholder of Baidu (China) Co., Ltd. (Baidu China) and Baidu.com Times Technology (Beijing) Co., Ltd. (Baidu Times).

In February 2008, it assisted in establishing Beijing BaiduPay Science and Technology Co., Ltd. (BaiduPay), jointly owned by Baidu Netcom. BaiduPay will operate an online payment platform.

Robin  Li
Chief Executive Officer
Chairman

Robin Li has served as our chairman of the board since our inception in January 2000 and as our chief executive officer since January 2004. Prior to founding Baidu, Robin Li had accumulated extensive knowledge and practical application experience in search engine technology. Mr Li worked as a staff engineer for Infoseek, a pioneer in the Internet search engine industry, from July 1997 to December 1999 and he was a senior consultant for IDD Information Services from May 1994 to June 1997.

Robin Li received a Master of Science Degree in Computer Science from The State University of New York at Buffalo and a Bachelor of Science Degree in Information Management from Peking University.

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