In July the China Internet Information Network Center (CNNIC) published its bi-annual report into the state of the internet in China (report in Chinese).
The report is a good guide into the browsing behaviour of netizens, the common phrase used to describe Chinese internet users.
The report is based on surveys sampling 30,000 Chinese residents older than six, from all of China’s administrative regions.
In this article, I’m going to examine the implications of the report and use the findings to help guide B2B marketers to understand the search engine market in China.
Chinese internet users
As of June 2014 the number of Chinese netizens went up from 618m to 632m, a 2% increase from December 2013. The internet penetration rate in China now stands at 46.9%, well below the rate in America and Europe.
Mobile netizens increased by 5% to 527m. The number of Chinese web users who use a mobile device to connect to the internet increased by 2.4%.
Chinese web users also cemented their reputation as heavy users of the internet by spending an average of 26 hours online. This is an increase of around one hour compared to six months ago.
In fact, when compared to a year ago the increase in time spent online is around four hours. Between June 2012 and June 2013 the increase was closer to two hours.
To all intents and purposes the internet population in China is growing at a steady rate. Internet usage is on a steady upward trend too.
The question that always interests me, though, is what do Chinese netizens do when they go online?
Chinese search engines
One thing Chinese internet users do is use search engines to find information, products and services on the web.
In the six months from December 2013, Chinese search engine use rose from 490m to 507m people. On mobile 406m people used a search engine, up from 365m people in December 2013.
There are five well-known search engines in China: Baidu (百度), 360 Search (360搜索), Soso (搜搜), Sogou (搜狗搜索) and Youdao (有道). The former two make up around 84% of the market share.
A search for ‘Burberry’ on Baidu
In January 2013 Baidu (baidu.com) held 72% of the search engine market in China and Qihoo’s 360 Search (so.com) had 11%. By January 2014 things had changed significantly.
Baidu’s market share had dropped to 58%, while Qihoo’s had increased to 25% matching exactly the amount of market share that Baidu lost.
What has come out of this is the fact that Baidu and 360 Search are the undisputed market leaders of online search in China, in both users and market share.
Baidu and Qihoo
Qihoo’s rapid expansion of its market share and users has seen its revenues increase and marketers are seeing potential there. In the first three months of 2014 Qihoo 360 rang up US$265.1m in revenue, a 141.3% increase from Q1 2013.
By comparison, Baidu generated US$1.53bn during this same period. These numbers don’t suggest that 360 Search now holds 25% of the paid search market. But 360 Search’s rapid growth has got marketers in China interested nonetheless.
Qihoo has grown its search engine from nothing to 25% market share in the space of two years. It has a 5% larger audience than it had a year ago. Netizens using its PC browsers rose by 2% compared to last year.
Qihoo 360 is China’s leading internet browser and security software suite. Monthly active users of its PC-based products and services have clocked in at a huge 479m people.
A search for ‘Burberry’ on 360 Search (so.com)
It is the mainland’s fastest-growing online search service and undisputed number one internet security provider.
On the other hand, Baidu is the basis of comparison for all other search engines in China. It has the highest usage of all the other search engines on the market. In Q1 2014 keyword advertising was still the top priority of Chinese advertisers.
In 2013 keyword advertising and contextual advertising brought the primary revenue in the Chinese search engine market. Search engine advertising revenue, namely revenue from keyword ads and display ads, accounted for 87.8% of the total revenues of search engines.
According to iResearch keyword advertising revenue took up 74.1% of the Chinese search engine market. Revenue from display ads of advertising alliance and navigation ads accounted for 13.7% and 4.5% respectively.
Why use Baidu and 360 Search?
One reason that so.com is becoming popular for paid advertising in China is because it tends to have a lower cost per click (CPC) than Baidu in many industries. Conversion rates on 360 Search tend to be lower for comparable projects though.
In the long term I’d suggest that conversion rates on so.com will improve. This is particularly true for businesses that face less competition in their niche who are likely to find a lower CPC on 360 Search.
Users and marketers know what they get from Baidu and therefore conversion rates are higher. People use what they trust, but as the market is shifting so are user’s perceptions.
But from a digital marketing point of view Baidu is still best. It is constantly updated and therefore is always ahead of the game.
Baidu has a very good desktop editor and good security and click-fraud protection. It also has a very useful remarketing functionality built into its display network. There are 600,000 websites that partner with Baidu to display banner ads.
Baidu is China’s most popular search engine and this will be the case for a while to come. But the market is slowly shifting and savvy marketers are looking at ways to leverage the new players on the market.
So.com is now accounting for a quarter of all internet queries in China. In August 2014 the usage rate of so.com was 29%.
Qihoo has managed to build a captive audience for its portal, browser, and security software. This captive audience has helped drive users to its search engine, so.com.
So far, 2014 has seen 360 Search drive up revenues from paid search advertising. There is still plenty of room for both Baidu and Qihoo 360 to co-exist in China’s paid search marketing space.
If Qihoo’s revenues increase in line with its increase in market share and users, then 360 Search will start to become a very popular platform for advertising. It’s for this reason that marketers in China have been attracted to using 360 Search for paid advertising.
What will emerge in the near future is a clearer understanding of which platform has a better conversion rate for certain industries. Also, it will be easier to compare cost per click statistics for both search engines once 360 Search is more widely used for paid search marketing.
Do you use either Baidu or 360 Search for paid advertising? If you have any questions please leave a comment. I’d also love to hear your thoughts.