Digital Marketing China: 4 Tasks We Must Do When We Want a Slice of China’s Growth Pie in 2016

7 Mar 2016 | Blog | 0 comments

Executive Summary

What is Baidu (百度)? In China digital marketing’s context, as much as this sounds like a totally random rhetoric question now, you will recognize the value and importance of Baidu by the end of this post. In short, Baidu is analogous with the “Google” of China. Why is that even relevant and important to Chinese online marketing? Read on to find out.

Here I summarize the growth trends for both China’s Internet users and search engines. I also outline some facts about China search engine market dynamics and what it means for businesses looking to grab a slice of China’s growth pie.

China Internet Users Growth Trend

By the end of 2015,

  • Total population at the mainland reached 1,374.62 million, of which 56.10% were urban permanent residents.
  • Mobile phone coverage rose to 95.5 sets per 100 persons.
  • Mobile broadband Internet users experienced a tremendous Compound Annual Growth Rate (CAGR) of 76% from year 2010, dwarfing that of fixed broadband Internet users which was merely CAGR of 11% from year 2010.
  • Mobile Internet traffic was up 103% over year 2014.

China Search Engine Growth Trend

By the end of 2015,

  • Market size of China’s search engine operators experienced a similarly explosive CAGR of 47% from year 2008 to RMB 77.00 billion, on an exponential growth projectile.
  • Chinese search engine users reached 566.23 million, of which almost 478 million were mobile search users.
  • Search utilization ratio had been more than 77% for both mobile and non-mobile search users in the past 2 years.

China Search Engine Market Dynamics

By the end of 2013,

  • Baidu topped China’s comprehensive search engine websites in terms of brand awareness (99.1%), penetration rate (97.6%) and first choice preference rate (86.7%), exceeding virtually all competitors by large margins.
  • Overall average number of search engines used by Chinese netizens is 2.7. That on computer and mobile terminals phone were 2.6 and 1.7 respectively.
  • Nearly 70% of Internet users used 2 or more search engines.
  • Once users had established loyalty and preference for a particular search engine, only 2.2% will switch to alternatives.
  • Baidu was highly efficient in raising awareness, encouraging usage, sustaining usage and building loyalty amongst Internet search users such that 85.6% established Baidu as their preferred search engine.

Thus, for businesses looking to grab a slice of China’s growth pie,

  • Your website needs to be responsive or at least have both computer- and mobile-optimized versions to ensure good user experiences across different screen sizes and resolutions.
  • You would probably want to establish your website’s presence on Baidu in 3 ways:
    • Submit Web Site URL to Baidu: Ensure Baidu indexes your webpages in its search database so they have a fighting chance of appearing when Chinese netizens search
    • Baidu Search Engine Optimization (SEO): Optimize your web pages for Baidu so they ideally appear high on Baidu’s search results
    • China Search Engine Marketing (SEM): Invest in keyword advertising with Baidu especially for more competitive keyword phrases

Are these the only 4 tasks we should do? Certainly not. With China’s ecommerce looking to overshadow that of the US, the UK, Japan, Germany and France combined by 2020 according to Shanghai-based market research firm iResearch, this is another area to consider too. Dominating 80% of this flourishing space are Alibaba Group’s Alibaba (阿里巴巴), Taobao (淘宝网) and Tmall (天猫) sites catering to B2B, C2C and B2C segments respectively. Meanwhile, Tmall and JD.com (京东), with around 50% and 23% market share respectively, battle out daily in the fast-growing B2C segment. Nevertheless, Baidu still boasts an unrivalled stranglehold over Chinese market penetration. Furthermore, it benefits you more when your ecommerce sites are indexed and ranked well on Baidu too. Thus, our strong emphasis in mastering these 4 tasks.

Until quantitative and qualitative indicators signal otherwise, having responsive/mobile-friendly websites, adding website URLs to Baidu and performing the associated SEO and SEM are arguably the 4 most important related to Chinese online marketing you need to know and tap on in order to position your brand in front of the vast majority of the 1.37 billion people in mainland China.

PS: Also check out our 2016 Guide on Baidu Site Verification for arguably the most current step-by-step guidance on adding and verifying your domain ownership with Baidu. After verifying your site, you can also follow our 2016 Guide to Submit Site To Baidu using 1 of the 6 modes available for indexing.

China Internet Users Growth Trend

According to the Statistical Communiqué of the People’s Republic of China (PRC) on the 2015 National Economic and Social Development (2015年国民经济和社会发展统计公报) freshly released by the National Bureau of Statistics (NBS) of China (中华人民共和国国家统计局) on 29 Feb 2016, the total population at the mainland stands at 1,374.62 million at the end of 2015, a year-on-year (YOY) increase of 6.80 million. Of this total, urban permanent residents number 771.16 million, accounting for 56.10% of the total population.

Population of Mainland China
(Figures in Millions as at end of 2015)
Total Population: 1,374.62
Urban: 771.16 (56.1%) Rural: 603.46 (43.9%)
Male: 704.14 (51.2%) Female: 670.48 (48.8%)

By the end of 2015, there were 1,536.73 million phone subscribers in China, of which 1,305.74 million were mobile phone users. Mobile phone coverage rose to 95.5 sets per 100 persons. Within a short span of 5 years, the number of fixed broadband Internet users increased at a Compound Annual Growth Rate (CAGR) of 11% from 126.29 million in 2010 to 213.37 million in 2015.

Over the same period, the number of mobile broadband Internet users experienced a tremendous CAGR of 76% from 47.05 million in 2010 to 785.33 million in 2015. Mobile Internet traffic was 4.19 billion G, up 103% over the previous year. Internet users numbered 688 million, growing by 39.51 million. Of the total, 620 million were mobile Internet surfers, increasing by 63.03 million from 2014.

2010-2015 Year-End Number of Broadband Internet Users

Various factors culminated in the explosive growth in mobile broadband Internet users over the years. Intense competition from major Internet companies and traditional home appliance manufacturers entering the mobile phone market drove down prices, making them more affordable. Intensified government efforts to support development of mobile Internet, urge operators to lower tariffs, improve network coverage and reduce threshold for mobile Internet access also helped.

Enlargements in mobile phone screens and improvements in mobile application experiences also solidified the trend of mobile phone becoming the main Internet terminal of netizens as China is seeing some switches from desktops, laptops and tablet PCs in recent years. Increasingly, more new rural netizens are also using mobile phones to access the Internet.

According to figures released by the China Internet Network Information Center (CNNIC) (中国互联网络信息中心) on 22 Jan 2016, the number of Chinese netizens reached 688.26 million, with a penetration rate of 50.3% at the end of Dec 2015. Meanwhile, half-year growth rate had gradually decreased with improvements in Internet penetration rate and an Internet user base that had more than doubled in the past 6 years. The half-year growth rate had since been range bound between 2.3% and 3.1% in the most recent 2 years.

2009-2015 China Internet User Scale, Internet Penetration & Half-Year Growth Rate

China Search Engine Growth Trend

According to multi-years data compiled from Analysys International (易观国际), riding on the growth of both fixed and mobile broadband users, the market size of China’s search engine operators also experienced a similarly explosive CAGR of 47% from RMB 5.14 billion in 2008 to RMB 77.00 billion in 2015.

2009-2015 China Search Engine Operators' Market Size (YoY)

Analysys also postulated that the years 2005 till 2012 inclusive corresponded to the high-speed development period of China’s search engine market. This period saw the rise of vertical or specialty or topical search engines and migration of users towards mobile platforms.

2013 marked the progression of China’s search engine market into application usage maturity. Gradually, search engines evolved into a one-stop service solution for meeting user needs as boundaries between ecommerce and offline commerce blurred.

As mobile terminal search request volume and traffic continue to climb higher while user search experience improves, mobile terminal business model becomes increasingly clear with mobile advertising alliances emerging one after another. Search box eventually becomes embedded as one of the functional modules in mobile applications while search platform carriers become increasingly abundant. A new innovation era is taking shape once again.

It remains to be seen if this would enable China search engine operators’ to continue on its exponential growth projectile.

2009-2015 China Search Engine Operators' Market Size (QoQ)

When you examine the China search engine operators on a quarterly basis, you would realize they generally follow a yearly cyclical pattern or seasonal variation. Q1 is usually the worst performing quarter with advertisers tightening on their marketing efforts. It does not help when the first day of the Chinese New Year typically falls between 21 Jan and 20 Feb each year inclusive and traditionally continues to be celebrated for another 14 days. Performance rebounds sharply in Q2, making it consistently the best performing quarter yearly from 2009 to 2015. However, growth rate generally resumes its decline for the next 2 quarters before bottoming out in Q1 of the following year and the cycle repeats.

Barring any major developments, China search engine operators seem to continue on an exponential growth projectile. On the other hand, it appears that the peaks and troughs of the quarter-on-quarter (QoQ) growth rates are converging, implying an increasing probability of China search engine operators’ market size reaching a plateau. Annual GDP growth rate after 2010 has also been on a decline according to figures from the National Bureau of Statistics of China, pointing towards a slowing Chinese economy, and putting further downward pressures on these search engine operators’ market size.

2009-2015 China Search / Mobile Search User Scale & Utilization Ratio

By Dec 2015, the number of Chinese search engine users reached 566.23 million, amongst which almost 478 million comprise of mobile search users. For at least the past 5 years, search utilization ratio had been range bound between 79.3% and 82.3%. However, mobile search utilization ratio had been climbing steadily between 2010 and 2014, becoming range bound between 76.5% and 77.1% only in 2014 and 2015.

With mobile phone coverage rising to 95.5 sets per 100 persons according to the latest statistics from NBS, both mobile penetration and mobile search utilization ratio may been reaching saturation levels. The obvious outlier is the extraordinarily high mobile search utilization ratio of 55.2% reported in Dec 2009.

Rapid growth of mobile Internet users in China in 2009 could be attributed to the following 4 reasons:

  • Appeal of 3G mobile Internet concept

China started official issuance of 3G licensing in Jan 2009, making this one of the communication industry’s biggest event, and greatly boosting confidence amongst players in the 3G industrial chain.

  • Gradual improvement in support level from terminal equipment for Internet access

Users were spoilt for choice as mobile phones newly launched in 2009 mostly included a large screen, virtually all supporting high-speed Internet access services, WAP2.0 and HTTP protocols.

  • Interplay between users

With the growth in China’s mobile phone users, existing users began to exert influence on peripheral non mobile Internet users. This phenomenon was most obvious then amongst mainstream mobile phone users (i.e. students, office workers and migrant workers).

  • Effective promotion initiatives of operators

In 2009, China’s mobile Internet tariff was successively adjusted, forming an important foundation for the rapid growth of mobile Internet users. At the same time, in collaboration with system providers and terminal manufacturers, operators actively launched software tools and applications (which are often free), providing ease of and reducing barrier to mobile Internet access.

China Search Engine Market Dynamics

2013 Comprehensive Search Engines' Awareness, Penetration & Preference Rates
  • A) Comprehensive Search Engine Website Brand Awareness (综合搜索引擎网站知名度)

According to the 2013 China Search Engine Market Research Report (available only in Chinese titled《2013年中国搜索引擎市场研究报告》) released by CNNIC (中国互联网络信息中心) on 27 Jan 2014, the top 6 comprehensive search engine websites in decreasing brand awareness levels amongst China netizens were Baidu (99.1%), Google (86.8%), Sogou (77.3%), 360 Search (74.5%), SOSO (63.9%) and Yahoo! (62.8%). A huge gap existed between the top 6 and the remaining brands which were all below 43%.

Brand awareness refers to the percentage of the total number of China Internet search users who are aware of the specific search engine. This is the preliminary indicator of corporate brand building. Firstly, search users need to become aware of search engine’s existence, eventually using it for their own Internet searches, and developing loyalty. Therefore, enhancing brand awareness is pertinent to brand building.

Early search industry entrants such as Baidu (百度) and Google (谷歌) had the time advantage to achieve higher brand awareness levels with numerous years of marketing efforts. In contrast, Sogou (搜狗), 360 Search (360搜索) and SOSO (搜搜) tapped on the established branding of superior products of their respective parent companies Sohu (搜狐), Qihoo 360 (奇虎360) and Tencent (腾讯) to achieve popularity levels exceeding 60%.

  • B) Comprehensive Search Engine Website Penetration Rate (综合搜索引擎网站渗透率)

Penetration rate refers to the percentage of the total number of China Internet search users who used the specific search engine in the past 6 months. The penetration rate reflects the proportion of Internet users using a certain brand over the past 6 months – an important indicator of brand coverage. After search users become aware of the brand, search engines need to spur the transition from brand awareness to actual usage in order to achieve user loyalty eventually. Therefore, penetration rate is also a critical link in corporate brand building.

The top 5 comprehensive search engine websites in decreasing penetration rate amongst China netizens were Baidu (97.6%), 360 Search (43.1%), Google (38.8%), Sogou (34.6%), and SOSO (23.7%). Similarly, a huge gap existed between the top 5 and the remaining brands which were all below 10%.

  • C) First Preferred Comprehensive Search Engine Website Choice (综合搜索引擎网站首选率)

First choice preference rate refers to the most preferred search engine choice as a percentage of the total number of China Internet search users. This preference rate is the final link in brand building, representing the brand loyalty amongst China Internet search users.

Baidu stood out as the first preferred comprehensive search engine website choice amongst 86.7% of China Internet search users, followed remotely by 360 Search at 8.8%. The remaining brands were all below 2%. Baidu’s stellar performance could be attributed to its early search industry entrance and successful brand building efforts. This had clearly translated into high brand awareness, penetration rate and loyalty amongst the Internet search users.

Albeit a late market entrant, 360 Search tapped on various tools such as security software, browser and navigation website to successfully establish itself as the next most preferred choice. Nevertheless, similar to Sogou and Google that had achieved considerably in brand awareness, much room remains for these 3 search engines to further boost promotional efforts to strengthen their penetration rates and improve user loyalty.

  • D) Number of Search Engines Used by Chinese Netizens (中国网民使用搜索引擎的数量)

The overall average number of search engines used by Chinese netizens was 2.7. That on computer and mobile terminals phone were 2.6 and 1.7 respectively.

Nearly 70% of Internet users used 2 or more search engines while those who used only one search engine accounted for only 32.3%. What’s interesting to note was that 2 in 3 mobile phone netizens used only 1 search engine to the strong exclusion of other competitor brands.

2013 Number of Search Engines Used by Chinese Netizens

The number of search engines used and academic qualifications appeared to be positively correlated amongst Chinese netizens. The higher the academic qualification, the higher the number of search engines used. Netizens with Primary school and lower academic qualifications used an average of 2.1 search engines, increasing steadily to 3.7 amongst those with master’s degree and above. The higher the degree, the greater the demand for searches and associated expectations on search engines, which in turn resulted in higher simultaneous use of multiple search engines and greater ease of use.

2013 Chinese Netizens' Education Level vs Number of Search Engines Used

Conversion Efficiency Analysis of Main Search Engine Amongst Computer Users

In assessing a corporation’s efficiency in the process of user acquisition, we need to examine 4 key transition stages, namely

  1. From Ignorance to Awareness: Raise brand visibility through advertising or other means
  2. From Awareness to Usage: Facilitate trial usage by providing convenient channels to interested users
  3. From Trial to Continual Usage: Provide desirable experience and performance to satisfy user demands
  4. From Continual Usage to Loyalty Formation: Sustain desirable user experience and performance, building top of mind loyalty and preferences

Similarly, in the context of search engine sites amongst computer Internet users, CNNIC realized that raising user awareness and encouraging user experimentation with search engine sites were the easier steps. The greatest challenge lay in building user loyalty through prolonged usage. This was because apart from reasons of habit formation, demand side factors such as user preferences were extremely sticky.

CNNIC’s study revealed that once users had established loyalty and preference for a particular search engine after at least 6 months’ usage, only 2.2% would switch to any alternatives. Furthermore, supply side factors such as search traffic sources such as browsers and various navigation websites had default search provider settings which were hardly changed.

In deriving its China Search Engine User Conversion Model (中国搜索引擎用户转化模型), CNNIC lets “Used in past half year” represent users who had at least tried the search engine, “Top 2 most frequently used websites” represent prolonged users, and “First preferred website choice” represent loyal users. Accordingly, the model is as follows:

China Search Engine User Conversion Model

Analysis of the top 4 most preferred comprehensive search engine websites amongst computer end users revealed the following:

Baidu

Baidu commanded phenomenally high conversion efficiencies across all 4 key transition stages. 99.3% of people using computers for Internet search knew of Baidu. In turn, 97.8% of these people had used Baidu over the past 6 months. Of those using Baidu in the past half year, 98.9% listed Baidu as one of their top 2 most frequently used search engines. Finally, 89.1% of these prolonged users established Baidu as their preferred search engine.

In view of Baidu’s high conversion efficiencies, further increases in computer end users are highly likely to come from cultivating fresh search engine user groups from new Internet and search users. By doing so to expand the breadth of Baidu’s search user groups, it will also be solidifying its Internet user penetration rate and loyalty.

360 Search

360 Search had achieved considerable success for the latter 3 key transition stages as users were converted from awareness to loyalty, second only to Baidu. However, it had the lowest conversion rate for raising brand awareness of computer users at 76.3%. Therefore, 360 Search needs to boost its brand visibility while maintaining or improving its conversion efficiencies for other aspects of brand building.

Sogou

Sogou had achieved considerable success in brand awareness at 78.8%. However, its weakness started to show in subsequent stages. Sogou therefore needs to enhance its user stickiness to encourage continual use and build loyalty as well as preference for Sogou.

Google

Google had achieved much success in brand awareness at 88.5%. In the next 2 key transition stages, nearly half the users at each stage were converted. However, the weakest link was in building user loyalty where the conversion rate was merely 8.1%. Thus, Google’s most important task is in enhancing user loyalty.

Selected Search Engines' User Conversion Charts

CONCLUSION

What is Baidu (百度)? Perhaps it is more appropriate to ask “Why do we need to know about Baidu?” When we have come to be aware of the achievements of Baidu in China, we will realize it is a brand we simply cannot ignore if we are truly serious about reaching out to the vast majority of the 1.37 billion people in mainland China. It is analogous with the “Google” of China.

Before we dive into better understanding Baidu, let us have a broad appreciation of China netizens first. First thing we need to ensure is that our website is responsive or we have at least both computer- and mobile-optimized versions to ensure good user experiences across different screen sizes and resolutions. Why?

Of the 1.37 billion people in mainland China, 56.10% are urban permanent residents. Latest figures indicate that new rural Internet users had increased at nearly double the rate of new urban Internet users in 2015 compared to 2014. Meanwhile, mobile phone coverage rose to 95.5 sets per 100 persons. Mobile broadband Internet users’ growth is compounding at nearly 7 times that of fixed broadband Internet users.

Intensified government efforts to support development of mobile Internet, urging operators to lower tariffs, improving network coverage and reducing threshold for mobile Internet access also help reinforce the trends I highlighted here. Enlargements in mobile phone screens and improvements in mobile application experiences solidify the trend of mobile phone becoming the main Internet terminal of netizens too.

As the second most popular Internet application after instant messaging (90.7%) as of 2015, search engines (82.3%) is arguably the best channel for targeting users with commercial intent, simply because the former is more social than commercial compared to the latter. Additionally, search utilization ratio has been more than 77% for both mobile and non-mobile search users in the past 2 years. When you agree on this, then the next natural question is “Which search engine(s) do I focus on?”

This is when virtually all statistics are pointing towards a clear winner: Baidu! This means you would probably want to establish your website’s presence on Baidu in 3 ways. One, you would want to have your webpages indexed by Baidu they have a fighting chance of appearing when Chinese netizens search. Second, you would want to optimize your web pages for Baidu so they ideally appear high on Baidu’s search results. Third, you would want to invest in keyword advertising with Baidu especially for more competitive keyword phrases so you could maximize your online reach efficiently and effectively. Why?

Baidu tops China’s comprehensive search engine websites in terms of brand awareness (99.1%), penetration rate (97.6%) and first choice preference rate (86.7%), exceeding virtually all competitors by large margins. It is also highly efficient in raising awareness, encouraging usage, sustaining usage and building loyalty amongst Internet search users such that 85.6% established itself as their preferred search engine.

In summary, when we are truly serious about reaching out to the vast majority of the 1.37 billion people in mainland China efficiently and effectively, your website needs to be responsive or at least have both computer- and mobile-optimized versions to ensure good user experiences across different screen sizes and resolutions. Additionally, you would probably want to establish your website’s presence on Baidu by having your website indexed by it, optimizing its pages to rank high on Baidu’s search results and investing in keyword advertising with it.

Clearly these are not the only 4 tasks. Ecommerce is another aspect to consider too. Nevertheless, Baidu still boasts an unrivalled stranglehold over Chinese market penetration. Furthermore, it benefits you more when your ecommerce sites are indexed and ranked well on Baidu too. Thus, our strong emphasis in mastering these 4 tasks.

Until quantitative and qualitative indicators signal otherwise, having responsive/mobile-friendly websites, adding website URLs to Baidu and performing the associated SEO and SEM are arguably the 4 most important related to Chinese online marketing you need to know and tap on in order to grab a slice of China’s growth pie.

Updated 25 Mar 2016: Also check out our 2016 Guide on Baidu Site Verification for step-by-step guidance on adding and verifying your domain ownership with Baidu.

Updated 06 May 2016: Check out our 2016 Guide on Submit Site To Baidu for step-by-step guidance on providing your website’s URLs to Baidu for indexing too.

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Over the coming weeks, I will be looking at Chinese search engine Baidu in greater detail and sharing how you too can tap on it to drive your business growth.

Need help in getting Baidu to index your website? Give us a call at +65 8291-8088 or send me a private message via our contact form.

Let me know your thoughts on the topic, please share them in the comments below.

Thank you for reading my post.

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