China Search Engine Snapshot
Google and Baidu battle it out for the hearts, minds (and RMB) of China’s netizens.
The Chinese search engine market is dominated by three major players – Baidu, Google and Yahoo, of which Baidu is by far the biggest. Competition between Baidu and Google is becoming increasingly intense, as each strives for a bigger share of a market worth RMB 818 million (USD 110 million) in Q3 2007 (representing a 110% year-on-year increase). The market share of all three search engines is growing steadily, squeezing out all remaining competition.
According to online market research company iResearch, Baidu now aacounts for nearly 61% of search engine traffic in China, followed by Google with nearly 24% and Yahoo China just over 10%. Quarter after quarter, Google and Baidu have both been exceeding their China-based earnings targets, sending analysts scrambling to predict new ones. Over the past three months, Baidu’s 2008 forecast has gone up from USD 3.60 to USD 4.02 a share. Google’s 2008 consensus has risen from USD 19.49 to USD 20.59 a share.
On the back of new profit models and service diversification, Baidu’s total revenue increased nearly 24% (quarter-on-quarter) to nearly RMB 500 million (USD 67 million). Under its “online ad plus data support services” profit model, Baidu has recently introduced a range of new offerings, including voice, video and game search functionality, advertising services through Baidu TV, and has plans to enter China’s booming e-commerce market.
Although Baidu has copied Google’s clean homepage look, the rest of the company’s strategy is original. It maximizes its nationalist advantage by attacking Google as a foreign invader (view this mildly xenophobic video sample), and has undertaken a series of aggressive advertising campaigns both online and offline. It also allows advertisers to pay for website placement in its search results, giving it a revenue stream advantage over Google. Google has responded by recruiting a Chinese sales force, hiring top-notch graduates from China’s best technology universities and seeking partnerships with popular Chinese Internet companies such as Tencent.
A Closer Look at Baidu
Incorporated in January 2000, Baidu became a point of pride for the Chinese after its stock price jumped five-fold to USD 154 on the first day of its 2005 offering. Although the stock price fell back quickly, its early rise prompted a hysteria that has made Baidu founder Robin Li a national hero.
Baidu focuses on offering products and services that enable users to find relevant information. It offers a number of services at Baidu.com to users free of charge. These include Baidu Web Search, Baidu Post Bar, Baidu News, Baidu Knows, Baidu MP3 Search, Baidu Image Search, Baidu Space, Baidu Encyclopedia and other search products.
Baidu’s extremely popular Post Bar, an online bulletin board and gathering place, enables users to answer search queries, comment on one another’s answers and form the sort of social networking community that U.S. search engines have ceded to sites such as MySpace. Post Bar helped create a phenomenon around China’s version of American Idol, with a contestant nicknamed Chun Chun attracting nearly 18 million posts at the height of her popularity.
Also popular are the Baidu Movie, TV Search and Blog Search services, providing both subscription and non-subscription based services which allow users to search Chinese media websites and Chinese language blogs. Baidu also launched a trial version of Baidu Video Search in February 2007, which enables users to search for and access online video clips hosted on third party websites.
According to Baidu more than 3 million Chinese citizens now make use of its Video Search service, accounting for over 90% of online video searches. The most popular video sharing sites accessed through Video Search were Tudou.com (22% of traffic), 56.com (20%) and Youku.com (14%). Adult-related content searches account for over a third of daily search volume, which may trigger an alarm in the Chinese government’s outsized web censorship department.