First posted on Read/Write Web on April 4th
<p>The Outlook for Search in China</p>Today China boasts over 105 million Internet users, not to
mention 350M mobile users (growing by 57 million every year). By 2010, Chinese
Internet users will outnumber US Internet users by 25%. Currently, 87% of the
Chinese Internet audience uses search. And given Internet search’s dominance of
monetization and audience rankings globally, the competition for the top spot in
the Chinese search market is pretty intense.
Baidu, Google, Yahoo, Sohu and Sina are battling each other
to be the leading provider of search in China. Currently the two largest search
players, Baidu and Google, account for almost 90% of the searches (source:
CNNIC Search Survey, 2006), per the latest local search market share depicted in the pie chart below.
Chinese Search Market
Though it doesn’t show up in the main search rankings, Tencent - the leading Chinese Instant Messaging (IM) platform with over 220M active
users - has been making significant in-roads into this market by licensing Google’s
search in 2005.
More than 3 out of every 4 Internet searchers in China use
multiple search engines (source:
CNNIC Search Survey, 2006). Therein lies one of the more interesting
dynamics of this market: Baidu and Google clearly lead the field in all aspects
of search, through the variety of searches they offer and the quality of their
results. Sohu features more prominently in MP3 and video search, compared to its
lagging ranking in web search. Yahoo, on the other hand, has been struggling
with its local partnering strategy - as it failed to take advantage of large
acquisitions locally, including 3721 and the much publicized Ali Baba. Indeed
Yahoo's brand seems weaker in China compared to Google’s and other local players
- as a
result of its lack of focus (and differentiation).
Search Type
Even though Google is trailing Baidu in market share, it
has made some significant progress in the last 2 years in China. It started to
comply with local laws in China by filtering its results (and it’s the only
one that informs users when it does so). Google also introduced its first music
search - though its results point to music sites and not to downloadable music
links, like its competitors.
Google recently managed to outflank Baidu in terms
of perceived quality. Recent
research by Keynote Systems shows that among 1200 Internet users in China,
Google outperformed all other competitors in 11 out of 13 factors measured.
Moreover, most participants that ranked Google highest were actually using
another search engine as their primary site for search. Google’s excellent
scores were not surprising, given that the 3 most important criteria for ranking
search engines in users minds were: clean home page design, quality of web
search results, and quality of image search results (all of which play strongly
to Google’s hand). This trend speaks strongly for Google in terms of catching
up to Baidu in the market share.
However, “both Google and Yahoo could still further
improve their government relations in China”, quipped Janelle Wu, who was
formerly Senior VP at NetEase.
Janelle Wu also mentioned that one of Baidu’s great
strategic moves was hiring R&D experts from the US, while recruiting locally
for sales talent.
Baidu is currently enjoying virtually double the market
share in all types of search over Google. A 2006 Study by CNNIC cites other
reasons for Baidu attracting a large user base, including Baidu’s well-liked
Bulletin Boards and its responsiveness. Baidu also benefits from its wildly
popular MP3 search, which takes users directly to downloadable music. This could
be a major headache for Baidu in the future if China decides to tighten its
enforcement of IP laws, with respect to illegal music.
Sohu, Sina and Yahoo all draw significant numbers of users
to their search sites through their popular free email offerings, but that’s
still not enough to help them break into the upper echelon of search - currently
occupied by Baidu and Google.
In terms of brand awareness,
Baidu once again stands out with 87% - while Google and Yahoo trail with 64% and
39% respectively (source:
CNNIC Search Survey, 2006).
Furthermore, more than 50% of Baidu’s users
are under 23 years old. Since 80%
of people under 24 years old use the Internet in China (source:
the CASS China Internet Survey, 2006) compared to a much lower ratio for
older age groups, Baidu’s momentum is bound to continue. Maybe it’s for this
reason, and lack of further explosive growth opportunity at home, that Baidu
decided to launch its first international search in Japan last week.
While Google’s
perception has improved
considerably among Internet users in China,
its refusal to offer its Gmail and Blogger services locally (due to privacy
concerns) will probably slow its efforts to boost its user base.
However Google continues to invest in the Chinese Internet market, with
a
minority stake in P2P player Xunlei - which is aimed at the local online video
market. This move might have other benefits for Google, as Xunlei
doesn’t support Baidu downloads for instance.
Among all the players, the one to watch is Tencent. Given
its dominance in IM and success in entering new markets such as casual games,
mobile chat and virtual goods - it has the strengths to make a decent entry
into the Chinese search market.
The Chinese search market is bound to hold a few surprises
in the next year or two, as most Chinese Internet users claim that factors such
as duplication of results, freshness and quality of the way results are ranked,
could use further improvement.
Speaking of improvement, Google apparently needs to pay
more attention to the quality of its image search, as it returns virtually no
images for the Chinese
name of former president Deng Xiaoping. Baidu, on the other hand, could be
leveraging its new Japanese office to offer a better service to its users
searching for adult terms like “sex”. Baidu
apparently returns only 3 results for “sex” in its Chinese site, whereas its
new Japanese site returns 107,000 images for the same search term.
