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Baidu’s Market ShareIs it under threat from Chinese Search Competitors?

Alan Clements Baidu Interview

Baidu’s Market Share

On 25th April the Chinese Search Engine giant Baidu is set to launch its latest set of quarterly financial results. Whilst many analysts expect Baidu to show continued financial growth and to retain its Chinese search market dominance, there are signs that Baidu’s growth and market share is on the decline.

To understand why analyists are making this claim, Alan Clements, Managing Director of Metafocus Global, a leading search and international internet marketing agency, explained on Russian Television about what is happening in the Chinese search engine market.

Russian news interview with Alan Clements

For the television interview on Russian TV channel POCCNR 24’s economics programme, Alan addressed and answered the following questions.

What share does Baidu take in the Chinese internet search market?

Baidu’s market share is around 70% according to figures released by Experian’s Hitwise in February 2013. The figure is expected to be the similar following April’s financial results announcement statement.

What companies take the remaining percentages?

The real story in the Chinese internet market at the moment is the 12% share gained by Qihoo 360 so.com search engine following its launch last August. Qihoo has used its Antivirus software and 360 Web Browser to leverage a market share in its new search engine. Interestingly Baidu has recently launched its own antivirus software to compete with Qihoo.

The table below shows figures from Feb 2013.

Chinese Search Engine Market Shares

Search Engine Market Share (Pageviews) at Feb 2013 % Change since Oct 2012
Baidu 70.49% Down 2.48%
Qihoo’s So.com 12.36% Up 2.72%
Sogou 7.85% Up 0.02%
Google 4.25% Down 0.47%
Tencent’s Soso.com 3.92% Up 0.24%
Bing 0.52% Same
Yahoo China 0.28% Up 0.03%
Netease’s Youdao.com 0.26% Down 0.05%
others 0.07% Up 0.04%

The key points to note are:

  • Baidu – 70% share– decreased by 2.48% (according to Hitwise) compared to October’s figures
  • Baidu has a 3.5 % global search market share
  • Qihoo’s so.com search engine has a 12% share – increased by 2.72% (according to Hitwise

Chinese search engine Baidu is about to report its results for the quarter. What results can we expect? What is the financial position of the company?

  • Baidu growth is still phenomenal but it is declining. Figures from Q4 2012 show growth at 42% compared to 82% in Q4 2011 and this could be set to continue.
  • Baidu’s Q1 2013 guidance forecast projected revenue being up by 38-43% year on year. This implies a continued growth slowdown throughout 2013.
  • Baidu’s stock price has also fallen by 20% since announcing their Q4 2012 results.
  • Baidu’s expenses are increasing due to a 70% increase in R & D investment in Q4 12. They have also setup an R&D lab in USA in Silicon Valley.
  • Competition from Qihoo (so.com) and and others (Tencent’s soso.com) pressuring Baidu to change its channel strategies
  • Mobile Market Concerns – Mobile CPC not as high as PC CPC – internet usage moving to mobile – Baidu only has 35% mobile search market share
  • Chinese economy also dropping (7.7% growth in Q1 2013)
  • Chinese advertising market experiencing slower growth (49% 2012 – 55% 2011 67% 2010)

What are the specifics of the search engines in the Chinese market? Do the world search engines operate there (for example Google)?

Google

Google’s share of the Chinese market has dropped significantly since it pulled out of China. The figures below show the decline.

  • 2010 (24.3%)
  • 2011 (19.8%)
  • 2012 (15.6%)
  • 2013 (4.5%)

However Google has an 89% global search share compared to Baidu’s 3.5% share. Google is still the third largest advertising provider in China with an advertising share of 6.2% in 2012.

Yahoo

Yahoo share of the Chinese search market is in decline – 21% share in 2006 to only 0.28% in 2013 (0.28%)

  • Alibaba has been running Yahoo in China since 2005 and is set to hand Yahoo China back to its parent company in 2014
  • Yahoo sold half its 40% share in Alibaba in May last year for a cool $7.1bn (£4.4bn).

Bing

Bing’s China search share is now 0.52% and is continuing to fall each month.

Perspectives of the search engines in China for this/next year?

  • Baidu urgently needs to address the mobile market and fight competition from competitiors who are managing the transition to mobile more seemlessly
  • Baidu’s politics with Google is likely to continue with Google’s Eric Schmidt commenting in March on China’s attempt to control the internet
  • The e-commerce sector in China has scope for growth with only 24% of the population buying online.
  • 1.2 Trillion RMB ($190 billion) was spent in China in 2012
  • 242 million people shopped online out of population of 1.3 billion
  • 41% of e-commerce users used a mobile device at least once and as in the west, this is a trend that is set to grow
  • The most common item purchased  by Chinese internet users is clothing (inc shoes and hats) with 82% of e-commerce users having purchase at least 1 item

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