DCCI survey on Chinese search market

I has just written a survey article on China』s search market. That article is based on a survey conducted by Analysys International. It can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/01/chinas-search-market-survey-and-bidus.html

On 2/5/2009, DCCI published another survey on China』s search market. It can be found here:

http://it.sohu.com/20090205/n262065965.shtml

I will copy their survey plot below:

From the above plot, one can see the year over year (YoY) growth rate for 2008 is 86.2%. They also published their prediction for the next 3 years. I don't really care about their prediction.

But their survey result for 2008 might be of use. Since Bidu hasn't published their 4^th quarter 2008 revenue number yet. Their survey result might give us some insight about the 4^th quarter performance for Bidu.

If we compare that with Bidu's analyst survey on Yahoo finance site:

http://finance.yahoo.com/q/ae?s=BIDU

From Yahoo, the YoY revenue is estimated to be 98.8% based on 19 analysts. The analysts are predicting full year revenue much better than the survey result from DCCI.

DCCI's results are based on the whole search industry in China. So unless Bidu were grabbing significant market shares from other search companies, DCCI's results seem to suggest Bidu's full year revenue won't be as good as what the Wall Street were expecting.

Now, we are in an impasse. The survey results conducted by Analysys International suggest Bidu's 4Q revenue will blow away Wall Street estimates.

On the other hand, survey results published by DCCI suggest Bidu's 2008 revenue will fall short of Wall Street estimates.

We will have to wait until after Bidu's 4^th quarter earning conference to find out which survey is more correct.

China’s search market survey and BIDU’s 4Q estimate

My previous article on the state of China』s search market can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/07/iresearchs-2008-2nd-quarter-chinas.html

The following is a survey for 2008 China』s search market. It is from Analysys International. What is interesting is this is published before any companies published their 4^th quarter revenue. Therefore, we can calculate BIDU's revenue estimate based on this survey. One can find the survey in the following:

http://www.analysys.com.cn/web2007/hysj_index.php/id_6163.html

The following graph list the revenue and year over year growth rate for China』s search market:

From the above graph, the total revenue for 4Q2008 is 1.52577 billions rmb. It had a YoY growth rate of 62.2%.

The next plot has the market share data for all the search engines in China

I will list the data below:

BIDU: 62.2% (was 59.3% in 2007)

Google: 27.8% (was 23.4% in 2007)

Yahoo: 5.8% (was 11% in 2007)

Sogou: 0.9%

Zhongsou: 0.9%

Sina: 0.4%

Ntes: 0.4%

Soso: 0.6%

Others: 1.0%

Now, we are able to calculate the Bidu 4Q2008 revenue.

The total search revenue for 4Q2008 is 1.52577 billion. We have an exchange rate of 6.842 as of today. Bidu's market share is 62.6%. Thus, Bidu's 4Q2008 revenue is 1.52577*0.626/6.842 = 0.13871 = 138.71 millions in US dollars. This is the search revenue. Bidu typically adds 0.2 millions for others. Therefore, the total revenue is 138.73 million for 4Q2008.

The 4Q2007 revenue was 78.3 millions. Therefore, the 4Q2008 revenue of 138.7 millions represents a 77.1% YoY increase.

Yahoo finance site's analysts' estimate for the 4Q2008 is 132.48M. See the following:

http://finance.yahoo.com/q/ae?s=BIDU

Therefore, from this calculation derived from Analysys International's survey, we shall see a nice revenue surprise.

Now, in terms of overall search market, Bidu is doing very well. So is Google. Yahoo is losing ground badly. Everybody is basically at a noise level.

At this point, it is a race between 2 horses. I think the race is almost over. Others are just too far behind to catch up unless there are other factors at work. But I do think that 「other factors」 are going to be online soon.

I think there are two dark horses. One is Tencent's Soso search engine. At this point, soso uses google search. Therefore, Tencent is not pushing this service hard. But Tencent is developing its search engine. Once it is developed, it will be pushed by Tencent's powerful QQ IM service.

Another dark horse is the Sohu's sogou search engine. Sohu didn't push its Sogou search engine during the Olympics because it has a much more powerful weapon at its disposal. That weapon is called Sogou Chinese Input Pinyin method. That weapon is ready now and the battle is starting. I will spend some time talk about this exciting new development.

But other than these two dark horses, I think the search war in China is basically over.

iResearch’s 2008 2nd quarter China’s search market

My last post on the iResearch survey can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/03/iresearchs-china-advertising-market.html

But that survey is not on China’s search market. Yesterday, it published a survey on the 2^nd quarter 2008 China’s search market. It can be found here:

http://www.iresearch.com.cn/html/consulting/search_engine/DetailNews_id_82891.html

Some basic result:

- China’s search market in 2Q2008 is $183 million dollars. It represents a 35.8% quarter over quarter growth and 96.7% growth year over year.

- Baidu has 62.8% of market

- Google has 26.2% of market

- Yahoo has 7.9% of market

- Sogou has 0.9% of market

- Zhongsou has 0.8% of market

- Sina has 0.3% of market

- Netease has 0.3% of market

It is interesting that a survey would be published right before all the Chinese companies would announce its 2^nd quarter earning. Either this survey is right or wrong. If it prove to be wrong from the upcoming earning announcements, iResearch is probably not a very good source of information. If it proves to be right, we would have a great source to know how the companies do just a few weeks before the earning announcements.

The following table gives the official 1st quarter result, the 2nd quarter estimate from iResearch, and the % increase quarter over quarter:

	1Q2008 search rev.	2Q rev. (estimate)	% increase
Baidu	81.7	114.9	40.6%
Sohu	1.6	1.65	0.3%
Sina	?	0.55	?
Netease	?	0.55	?

It predicted a search revenue for Baidu of 114.9 million for 2Q2008. Adds other revenue of about 0.2 million, we would have total revenue of $115.1 millions. It compares favorable to the average analysts estimate of $112.27 millions. If iResearch is right, we shall be a nice pop to Bidu’s stock price right after they announced their 2^nd quarter earning.

On the other hand, if iResearch is right, then Sohu’s Sogou is rather disappointing. It is so close to the Olympics and you would think Sogou would have gain since Sohu is an official Olympics sponsor and the producer of the official Olympics web site.

For Sina, they gave up on search already. For Netease, they might as well.

For course, I have no idea how accurate is iResearch. I will do a follow-up after all the companies announced their 2^nd quarter earning.

Sohu’s search monetization strategy

Just want to talk a little bit about how Sohu is going to monetize its search engine, Sogou.

My last post that is sogou related is here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/cnnic-2007-search-market-survey.html

It has a two prong strategies. First, it is going to use all of Sohu’s properties to sell Sogou. See the following web site:

http://www.sogou.com/fuwu/jingjia/tushi.html

If a company buy a key word on Sogou, it will not only be buying a presence on the search engine, sogou, it will also buying a presence in other Sohu properties such as emails, blogs, portal channels (news, sports, etc.), etc.

In addition, on 3/14/2008, it also start a service called Sogou 800. See the following web page:

http://www.sogou.com/fuwu/ppc.html

If a company become Sogou’s consumer and buy a key word, and when an internet user search on Sogou using that key word, that company information will of course be part of the search result. Nothing different here from other search engines.

But now, there will be a little green telephone sign next to the search result. The internet user can then click on that sign and give sogou his or her phone number. Sogou then will connect between that internet user with the customer service department of that small company. The first 10 minutes of phone service will be paid for by Sogou.

It is an interesting service. I have no idea how effective will this service promote Sogou.

But if it is effective, Sohu will incur some additional expenses in return for being a player in China’s search engine war. On the other hand, if it is not effective, Sohu won’t have to spend much.

It is what a hit game like TLBB can do for Sohu. Now, Sohu makes tons of cashes from that game. These extra money enable Sohu to spend a lot of money to promote her other services.

For Netease, I think it is dumb for them to get into search now. But for Sohu, I think they might still have a chance.

In addition to the above two strategies, their Olympics connection might give them a head up during Olympics. Search is a force of habit. If they can convert enough users to use Sogou during the Olympics, those users might just keep on using Sogou afterward.

Finally, Sogou might have a secret weapon in its disposal. It is just purely a guess on my part right now. If I have some more time, I will probably talk more about this “secret weapon” in the future.

Netease start to monetizing its search engine

My last post that is Yodao related is here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/cnnic-2007-search-market-survey.html

On 3/6/2008, Netease started to monetizing its new search engine, Yodao. See the following link:

http://a.yodao.com/login.s

From now until 3/30/2008, it also has a promotion where if a small company can get 100 dollars in promotion money when they put in 1 dollar. See the following:

http://a.yodao.com/campaign/200801/index.html

Yadao hadn’t done much and I don’t think it is even close in popularity to the top four search engine yet. When Sohu started its Sogou search engine, it waited for a long time before it started to monetize its search engine.

I doubt this will add anything of any significance to Netease’s revenue. I hope I am wrong, but it is just too late to get into search engines in China now. Baidu is just too good in technology, execution, management, and a tremendous head start. I have the feeling that Netease is just pumping money into a hopeless mis-adventure.

CNNIC 2007 Search Market Survey

My previous article on search is regard to a search market survey done by CIC. The link is as follows:

http://chinese-net-gaming-stock.blogspot.com/2007/09/chinas-internet-market-survey.html

CNNIC just release its 2007 Search engine survey. It is their third years where they did this survey. I don’t have all the information yet. But the main summary can be found here:

http://it.news.hexun.com/2007-09-26/100803395.html

http://it.sohu.com/20070926/n252364394.shtml

I compile the data into 3 tables. The first table is the people’s first choice for the search engine in both 2007 and 2006:

1st Choice	2007	2006
Baidu	74.5%	62.1%
Google	14.3%	25.3%
Sogou	2.8%	3.2%
Yahoo	2.1%	4.8%
Sina	1.7%	1.2%
Soso	0.7%
Yodao	0.6%
Others	3.3%

The second table compile the Brand Awareness data for each search engine. Note that I only have 2006 data. If anybody have the 2007 data, please let me know.

Brand Awareness	2007	2006
Baidu		86.5%
Google		64%
Sogou		36%
Yahoo		38.5%
Sina		15%
Soso
Yodao
Others

For this survey, they break down the cities they surveyed into three tiers. The following table gives the breakdown of Baidu vs. Google for the three tiered cities:

	1st Tier Cities	2nd Tier Cities	3rd Tier Cities
Baidu	67.33%	73.55%	83.82%
Google	22.11%	14.78%	4.99%

If we compare this result with the survey done by CIC, there are some interesting points that can be made:

Baidu – For both surveys, Baidu is getting stronger (69.5% for CIC and 74.5% in CNNIC). The search engine war in China seems to be over.

Google – For the CIC survey, users loss seems to be stabilizing (from 24.1% in 2006 to 23% in 2007). But the CNNIC survey indicated continued major users loss (25.3% in 2006 to 14.3% in 2007). The possible explanation is that CIC survey only pools the 1^st tier cities. The user loss may have stabilized for the 1^st tier cities, but it accelerated for the 2^nd and 3^rd tier cities.

Yahoo – Major user loss as indicated by both surveys. For CIC, it went down from 5.2% to 2.3% . For CNNIC, it went down from 4.8% to 2.1%. For the CNNIC, it had went down to the fourth search engine, behind Sogou.

Sogou – Again, there is a discrepancy by both surveys. For CIC, there is a major user loss, it went down from 3.2% to 1.8%. But for CNNIC, the user base has basically stabilized. It went down from 3.2% to 2.8%. A possible explanation is that users in the 1^st tier cities has stop using Sogou. But that is countered by more users from the 2^nd and 3^rd tier cities started using Sogou as their first choice.

Others - Soso and Sina uses Google’s search engine. Ntes’s Yodao may be too little too late.

Summary – It looks like the search engine war is basically over, and Baidu is the winner. It has to be a humiliating defeat for Google. There is always a place for an English search engine in China. But the day for Google to challenge is basically over.

It is basically game over for Yahoo. They have to be the biggest loser for this year’s search engine war.

For Sogou, they don’t seem to be doing that bad. They may have jumped up to the third place. But it is not much of a price considering they are only 2.8%. But I still think they may have one last hurrah left, next summer’s Olympics. If they keeps on putting man powers to develop their search engine technology and build some new features only for the Olympics related search, they may be a good position to grab some users next summer. For example, if they can convince Chinese users that they have a 5 or 10 minutes advantage for Olympics related scoreboard or stories, many Chinese users will give them a shot. Besides, China’s internet is so big, there are places for three search engine to exist.

For others, the game is basically over. It may be too little too late for Ntes and Tencents.

China’s Internet Market Survey

On 9/17/2007 – China IntelliConsulting Corp (CIC) published the survey results based on users in three of China’s most important cities, Beijing, Shanghai, and Guangzong. The result speaks well for Sina and of course, Sina is all over this news.

The link is as follows:

http://tech.sina.com.cn/i/2007-09-17/13541744194.shtml

The result is more clearly shown in the following link:

http://tech.sina.com.cn/focus/2007search/index.shtml

For the search market,

9/2006 9/2007

	9/2006	9/2007
Baidu	61.9%	69.5%
Google	24.1%	23%
Yahoo	5.2%	2.3%
Sogou	3.2%	1.8%
Others	5.6%	3.4%

For the portals:

	3/2007	9/2007
Sina	34.5%	36.2%
sohu	26.1%	23.4%
Ntes	20.1%	17.7%
Yahoo	10.8%	8.8%
QQ.com	7.3%	7.5%

The following article gives the name recognition of the search engine

http://tech.sina.com.cn/i/2007-09-16/17321742430.shtml

Search Engine Name Recognition

	3/2007	9/2007
Baidu	81.7%	86%
Google	61.5%	67.1%
Yahoo	28.9%	23%
3721	3%	1%
Sogou	32.1%	27.1%
Soso	4.6%	5.2%
Sina	12.4%	10.1%
Ntes	4.1%	3.1%
MSN	1.5%	1.1%

First, the result gives a snapshot of the users preference for the three cities in the east coast. There maybe difference between the cities in the east coast and west coast. But more importantly, this survey doesn’t take into account of rural population.

In addition, some “independent” survey is not very independent at all. But I don’t know CIC and therefore can’t verify whether it is biased or not.

A quick summary:

For the search market:

Baidu is doing really well. Google went down from last year but went up from 6 months ago. All the smaller search engines are getting smaller.

For Sogou, it may have an extremely small market share (1.8%), but it does have a very large name recognition (27%). It may not be the 1^st choice for many users, but it is probably the 2^nd or 3^rd choice for a lot of users.

It strikes me that Baidu is really running away from the field. Google is a very distant second. Yahoo and Sohu’s Sogou may have a fighting chance to survive if the top two stumbles.

For the portals:

The result shows that Sina is increasing its distance from Sohu. The numbers for Sohu’s other properties (such as 17173, Focus, Chinaren, etc.) are included in Sohu’s number.

It is a little surprising in that Sohu had been pretty hot recently. Again, if rural population and west coast cities were included, Sohu won’t be fairing this badly. Sina had a reputation for users with higher education levels. Thus, it will have an inherent advantage for this survey.

But the trend is confusing as well. A possible reason could be that Sina had its blog, youtube, TV stations ready a good 6 to 9 months earlier than Sohu. Sohu just started these services and it hasn’t catch up to Sina’s head start yet. In addition, the effect of the Olympics hasn’t been felt yet.

In summary, Sina and Baidu have to be declared the winner at this point. Google is making a small comeback. But Google is not able to take market share away from Baidu. For Yahoo, it has to be disappointing in both Search engine and portal. For Sogou, it needs to keep on updating its technology and user friendliness. It still has an ace in his hand, the Olympics. For all other search engines, it maybe too late for them. Netease’s new search engine is still not out yet, but it may be a few years too late.

For the portals, Sina is sitting pretty. Its head start in coming out with blog, youtube, and TV stations, give it a competitive advantage. But Sohu has all of these now. In addition, Sohu seems to have an inside track on the Olympics. The game is not over by any means. Netease got to develop these web2.0 and video functions if its still want to stay in the game. China can support three major portals. Both Sina and Sohu are here to stay, if Netease screws up, then another will take its place.