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.

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.