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With Google gone, is Baidu set to completely dominate the Chinese search engine market or are there other challengers waiting in the wings?
This is a great topic and one that The China Sourcing Blog). He makes some interesting conclusions and outlines the core issues facing Baidu and the smaller Chinese search engines. You can read his post below.
Before its high-profile withdrawal from the Chinese market in March, Google was competing for control over the highly lucrative Chinese search engine market – growing fast and forecast to be worth $4.9 billion in advertising revenue by 2015 – with its Chinese competitor Baidu. Now, with the dust of Google’s exit to Hong Kong settled, Baidu indeed seems destined for a monopoly. Yet the future of this vast market hinges on other competitors’ readiness to fill Google’s void and challenge Baidu’s position as the clear market leader.
In spite of Baidu’s dominant position, the Chinese search engine market is host to several smaller competitors. The main ones are the Chinese division of Microsoft’s Bing; a Beijing based search engine named SoGou, owned by the large Chinese internet entity SoHu; former Google partner SoSo.com, owned by Tencent Inc.; and the Chinese division of Yahoo which owns 44% of the Chinese business-to-business site Alibaba.com. These potential challengers are all much smaller than Baidu, each holding less than 1% market share prior to Google’s withdrawal.
Nevertheless these companies are displaying some advantages which may yet enhance their ability to take on Baidu. Many of the competitors are, like Baidu, domestic firms with a better grasp on the Chinese market. Craig Mundie, Microsoft’s Chief Research and Strategy Officer, recently stated that Microsoft’s ability, as a Western firm, to maintain a longer presence in China indicates Bing’s potential to succeed. For its part, SoGou is supported by an active community centered on its parent SoHu.com.
Still, Q1 2010 data published by Analysys International suggests that Baidu profited the most from Google’s China exit. Baidu managed to extend its market share from 58.4% at the end of last year to an impressive 64% by the end of Q1 2010. While Baidu’s growth is not surprising, the fact that it extends beyond Google’s market share loss of 4.7% is. Instead of only acquiring some of the market share previously held by Google, other competitors have conceded a further 0.9% to Baidu, a significant chunk of their already puny holdings. Additionally, recent declarations of a 165% increase in Q1 net income and the implementation—to come on 12 May 2010—of a 10-for-1 split for its American depositary shares are indicative of Baidu’s momentum. Baidu’s competitors in China, it seems, simply lack the size and the ability to step up and fill the void left by Google’s exit. The current state of the industry thus seems to suggest that Baidu will reign undisturbed for now, drawing the majority of advertising revenue until its competitors manage to find a niche of their own in the Chinese market.
There are signs that something is stirring among Baidu’s remaining competitors, however. Recent rumors of a possible partnership between large Chinese internet company NetEase and MSN could, through NetEase’s vast user base and expert market knowledge, just give Bing a necessary boost to threaten Baidu’s entrenched position. Yet it remains a question of when – as well as if.
Source: The China Sourcing Blog
Written on Tuesday, 11 May 2010 22:17 by Matt McDougall
