Three Baidu Macro Trends to Look Out For in 2014
In 1642 England descended into civil war with King Charles I pitted against the English Parliament. With his powers declining the King attempted to swing the balance of power back to absolute rule, by using force if necessary.
With the democratic process undermined the country slipped into a brutal civil war, the Cavaliers supporting the King and the Roundheads lead by Oliver Cromwell fighting for the right of the People. Charles was defeated and executed.
There is currently a battle for supremacy in the Chinese search engine market. Qihoo 360’s search engine, established in August 2012, has grown at a ferocious rate to become the second biggest player in the search engine market.
Baidu is currently the dominant force, but its market share is slowly declining. Just what is Baidu doing to swing back the balance of power? In this blog I’m going to examine three macro trends to look out for in 2014 involving Baidu’s search engine.
Baidu versus Qihoo 360 search engine trends
When Qihoo 360 first entered the search engine market in August 2012 it had just 1.15 per cent market share compared to Baidu’s 80 per cent (web page in Chinese). Today it has around 25 per cent of the search engine market in China (web page in Chinese), an incredible change from 18 months ago. By contrast Baidu has dropped to around 58 per cent market share. It would seem that Qihoo’s gain is Baidu’s loss.
There are a few factors involved in this change. The first has to be the fact that Qihoo has a browser that is popular among Chinese netizens. All my colleagues in my office use it. The default search engine is of course 360 and unlike Internet Explorer users who immediately switch from Bing to Google when searching through that particular browser, 360 users are happy to use the Qihoo search engine. The company is also known for its popular antivirus software and mobile app store.
Prior to 2014 Qihoo set a market share goal of 30 per cent. This has already been revised to 35 per cent because of its continued rapid growth (web page in Chinese). And the company now plans a 10 per cent increase each year with a target of 40 per cent by 2015. Whether they reach this goal is anyone’s guess, but it has made Baidu sit up and take notice.
There have also been battle lines drawn between the two companies in the fragmented Chinese app store sphere. Baidu was announced as a new partner of the Tizen Association, its aim to establish itself on mobile devices where there is fierce competition from Qihoo. The Tizen Association is hoping to build and grow a new open source Linux based mobile operating system to compete with iOS, Android and Windows.
As it currently stands in China Google is locked out therefore there are a raft of third-party app stores of which Baidu and Qihoo are leading the market. Qihoo’s 360 Mobile Assistant and Baidu’s 91 Wireless are again fighting on another front.
Baidu is hoping to use Google’s approach; its Android operating system had 93 per cent of mobile search revenue in the US in 2012. Unlike Google, Baidu does not have a browser whereas, of course, Qihoo does. The battle lines are indeed drawn and it seems blood will be spilt. Who will lose their head remains to be seen.
Cost per click trends on Baidu
SEO is a long-term strategy that many companies buy into. From our experience at Nanjing Marketing Group we feel that the time frame for a SEO campaign is at least between three to six months and is then an ongoing process after this time. While the seeds of an optimisation campaign are starting to bud it’s a good idea to nurture them with a pay per click campaign.
A pay per click strategy can help to quickly gain potential clients before the fruits of the SEO campaign have fully developed. And this is exactly what many companies are doing on Baidu. The value of online transactions in China reached $190 billion in 2012 and this upward trend is set to continue. And for this reason cost per click trends on Baidu are steadily rising as the market place becomes more competitive.
Looking at some of our data from the travel and tourism industry, one of the more competitive industries on Baidu, it’s quite clear that CPC rates are on a strident upward trend. In August 2013 the average CPC for this particular industry was 2.15RMB per week.
As of February 2014 the average CPC for the same industry is 4.72RMB per week, an increase of 119.5 per cent in six months.
Whereas previously there were not so many competitors for specific keywords the CPC was rising steadily. With the increased interest in Baidu PPC certain ‘hot’ keywords have attracted fierce competition.
The quality score of certain keywords also has to be taken into account. There are many factors that affect the quality score. For example how relevant is the keword to the text ad and also how relevant is the keyword to the landing page? What is the keyword’s commercial value i.e. how much competition is there in that particular industry?
Finally it’s important to look at the click through rate (CTR) of your chosen keywords. And then you have to consider your campaign performance history. What is the overall CTR of all the adverts and keywords in your account?
With increased competition the quality score of certain hot keywords becomes lower. Therefore you have to bid more money for that keyword to push it to appear in a higher position thus pushing up the CPC.
In general it is becoming more expensive to maintain a higher position on Baidu’s paid ads within certain competitive industries. However, there are a number of ways to maintain a high position on Baidu. One way is by cleverly selecting your keywords. Using fallow ground increases the chances of more seeds growing and obtaining a better yield; the same is true of Baidu pay per click. Finding and exploiting uncompetitive keywords can help lower your CPC.
Another way to improve keyword quality score is to add new creatives to the ad group and to optimise the landing page of the website. By adding new creatives i.e. changing and improving the title and descriptions that appear on the Baidu ads, you try to make the keywords more relevant to the text ad and the landing pages thus improving the keyword quality score.
Desktop versus mobile
There is currently a migration away from desktop to mobile and this spells danger for Baidu. The reason this is dangerous for Baidu is because the company now has to compete in the mobile arena with Alibaba and Tencent. These two giants have been slugging it out to dominate this space during 2013. It is also now clear why Baidu wants to be involved with Tizen.
The question for Baidu is how to monetise the mobile market like they have on desktop. Lets compare two industries for which we have data: travel and tourism and financial services.
I’m going to compare the CPC between desktop and mobile for these two industries. Lets start with financial services. During January this year the average CPC rate on desktop was 2.16RMB. During the same period the average CPC rate on mobile was 0.55RMB.
The differences between desktop and mobile are even starker for the travel and tourism industry. During the same period, January 2014, the average CPC rate on desktop was 4.71RMB. This is compared to an average CPC rate on mobile of 0.94RMB.
Our data suggests that the CPC on desktop is much greater than on mobile. But why is this? The fact that more Internet users access the Internet via mobile than desktop, but it costs less to advertise on mobile seems counterintuitive. Well, there are many reasons for this.
The fact that companies like Alibaba and Tencent are able to keep their users within their own apps and away from Baidu’s search engine is one reason for this discrepancy. Alibaba has apps for Taobao and Tmall and therefore don’t use Baidu. Users go direct to the source rather than searching using keywords.
By the end of 2013 the percentage of Chinese users accessing the Internet via mobile grew to 81 per cent. But it’s clear that Baidu is missing out on this revenue stream. Baidu must make inroads into mobile if it is to diversify and compete in the future.
Chinese users are clearly moving away from using desktops and laptops and therefore Baidu’s search engine. Some still use Baidu’s search engine app on mobile, but increasingly people are changing the way they search online.
The Glorious revolution
In 1688 the Glorious revolution was a bloodless revolution that set Britain on the path to constitutional monarchy and parliamentary democracy. It was a period of relative calm after the events of the execution of Charles I. Perhaps the same thing in happening in China with Baidu.
Baidu is facing problems from many angles, but is well placed to handle the situation. It’s involvement with the Tizen Association means it can begin to make inroads into the mobile market. Pay per click is still seen as vital for new businesses moving into China while their SEO efforts bear fruit.
If Baidu can adapt and diversify from just being a search engine then it can maintain its place as the undisputed Internet King of the Middle Kingdom.
What's your opinion of these trends? Do you think there's anything else important to add? Please leave a comment below.