Google publicly declared its intention in March to move its Chinese-language Internet search operation in Hong Kong in hopes of bypassing censorship laws for companies that operate in mainland China, but the public showdown with the Chinese government never seemed destined for a happy ending. Google announced late Tuesday night that China will not renew its Internet Content Provider license–a key authorization scheduled to expire Wednesday–unless Google stops redirecting Google.cn visitors to Google.com.hk.

It seems unlikely that its newest strategy will past scrutiny either. Instead of automatically redirecting Google.cn users, Google has created a landing page at Google.cn “where users can conduct web search or continue to use Google.cn services like music and text translate, which we can provide locally without filtering,” Google said in a blog post. “This approach ensures we stay true to our commitment not to censor our results on Google.cn and gives users access to all of our services from one page.”

Read the full story here:  http://news.cnet.com/8301-30684_3-20009111-265.html

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Baidu to hire U.S. engineers to work in China

Baidu Inc, China’s leading search engine, will start hiring software engineers directly from the United States early next month, as it seeks to expand its technological capabilities and raise its global profile.

Baidu (BIDU.O) stands to be the biggest beneficiary in China’s search sector after Google Inc (GOOG.O) relocated its China servers to Hong Kong following a high-profile spat with Beijing over censorship and hacking.

Baidu would hire 30 mid-to senior-level software engineers from Silicon Valley at a job fair on July 10 to drive new technology projects, its first direct hiring from the United States, a Baidu spokesman told Reuters on Tuesday.

“Baidu believes that talent is the key to our success as a company, and we go where ever the best talent can be found, whether here in China or in Silicon Valley,” Zheng Bin, Baidu’s human resources director said in a statement to Reuters.

“As we develop more and more advanced search technologies, our need for world-class talent will only continue to increase.”

Baidu is a household name in China but not well known overseas. Baidu Japan, the firm’s venture into the Japanese search market, has been loss-making ever since its inception.

Read full article here: http://www.reuters.com/article/idUSTOE65S0332010062

So far, this information resulted from some studies and personal observations and discussions. Now, this news: “Alibaba pulls ads from ‘low-quality’ Baidu“.

According to this press release, Alibaba ended its search engine advertising contract with Baidu due to unsatisfying marketing results. Alibaba says that they get too much low-quality traffic from Baidu which doesn’t convert into business. Besides, click fraud rates are on the rise.

So, again, consider this when doing or planning Baidu SEM campaigns:

a) Start your Baidu SEM campaign on a low level, include a test phase to figure out what works and what doesn’t.

b) You can still get a lot of eyeballs through Baidu, so it depends on your online marketing strategy: awareness vs. conversion. What counts more?

c) Clear and good ad text copywriting. Make it clear what the user will get when he clicks on the text ad.

d) Perfect landing page. No confusion or user losses allowed here.

e) Tracking and daily campaign optimization

According to reports, the companies are trying to protect website users who have created personal profiles and blogs. These profiles, many of which were created for private audiences, can be crawled by search engines and the information contained on these pages can end up among search engine results.

While these portals and social networks assert their decision to block Baidu is based on users’ rights to privacy, analysts say much of their motivation comes from dissatisfaction at Baidu’s domineering web presence. Just this week, Baidu, which claims 60 per cent of China’s search market share, announced beta tests of its e-commerce site that the company hopes will directly rival market powerhouse Alibaba.

E-commerce auction site Taobao.com, a subsidiary of the Alibaba Group, reportedly moved to block searches conducted by Baidu earlierthis week, as well as partially block searches by Google and Yahoo, in order to protect Alibaba users from being approached by illegal vendors.

“I find this excuse a real stretch. Since when has anybody worried about user privacy in China before? What guidelines do they use for protecting user privacy?” asked Paul Denlinger, owner of China Business Strategy. “This sounds much more like a desire to dial back the power of Baidu and its search.”

Jason Kuperman, regional vice-president of digital development at Omnicom Group, added that, if social networks did not have further motive against Baidu, they could easily have implemented privacy protection measures on their sites instead of blocking the engine.

“I know Facebook allows you to have a specific profile which appears just for searches. That seems like a better solution than actually blocking any search engines,” he said.

Even with its dominant position in China’s search market, the pressure from the host of websites aligned against Baidu may be enough to elicit a strategy change before a distant search rival narrows its lead.

“My guess is that Baidu may put forth some privacy protection guidelines for the industry to discuss, and invite all other players to participate in the discussion,” Denlinger said.

Representatives from Baidu could not be reached for comment.

Tier1 cities:

• In the Tier1 cities like Shanghai, Peking, Guangzhou and Tianjin live only 6% of the Chinese population. They represent 13% of the gross domestic product.
• These cities are a strong competitions in terms of (foreign) investments and some markets are already close to saturation.

Tier 2 cities:

• In the 300(!!) Tier2 cities live 53% of the urban population. They represent 64% of the gross domestic product.
• Definition of a Tier2 city: Cities with up to 6 million inhabitants and a per-capita GDP of 34,000 RMB in average.
• These Tier2 cities offer a constantly increasing consumer market with a yearly income of 3,000 to 6,000 USD per household.
• Seen as a group, the Tier2 cities grow by 15% per year. 60% of them are located close to the coastal provinces in the eastern part of China.

Offline and online sales:

• Supply chains are far than efficient for foreign companies in China. Only 10% of the turnover is sold directly via retailers, whereas 42% of the turnover reach the consumer through three or more interconnected dealers in the supply chain. The result if a lack of insight into the behaviour of Chinese consumers.
• Only very few companies have direct access to consumers and sell their products online. Examples are Anheuser-Busch or Amway.

Some own thoughts / conclusions:

• 59% of Chinese people live in cities (Tier 1 + 2) representing 77% of the gross domestic product. Reversely, 41% live in rural areas (= roughly 560 million people), they stand for 23% of the GDP .
• The Tier2 cities are of growing importance. More and more companies try to open up this huge potential. From my experience, foreign companies have their headquarters in the Tier1 cities to set up business and gain first experience. But the potential to make money lies in the Tier2 and Tier3 cities. And this is not only true for cost reduction in manufacturing but increasingly for sales and market share growth.
• Parallely, the Internet penetration increases and this will sooner or later also bring online marketing and e-commerce along.
• Interesting will be how search engine market shares will develop. Right now, Baidu has a market share of almost 100% in rural areas. In the Tier1 cities it’s market share is reduced to about 40%, Google holds some 40% as well (I wrote an article before how market shares and demographic development interact in China). Anyway, this is a question about years, I suppose. But also makes clear that search engine market shares in China are not fixed yet. A lot of space to move is still available.
• What a potential for direct sales channels and e-commerce! Anyway, still some problems to solve like nationwide use and acceptance of credit cards for online payment, reliable and quick logistics and delivery services, etc. But with young Chinese generations heavily using the Internet already now, participating in social networking and web 2.0 tools, this is a good basis for the development of e-commerce activities. Not to mention the distances in China…

Recent global market shares of search engines (I/2008, netapplications.com):

Broken down into Asian countries, Google’s markets share looks like this:

I did some research and compared the positions of the search engines in the following Asian markets. If available I added the rough percentages in market share, sometimes the available numbers vary really heavily. Total percentage per country can exceed 100% as users use more than one search engine (depends on the source). Anybody got better, more accurate or additional numbers, just post them, I’ll update the chart.

It is very obvious that Google’s global market share is nurtured by high market shares in the US and EU. In some parts of Asia local search engines and Yahoo are often preferred. Why is that?

Possible reasons:

• missing language adaptation, Google mainly dominates English-speaking countries
• poor management skill, read the comments of this article
• local search engines better serve the desires of the search engine users. Example: Naver in Korea with a total different search result page layout that’s been copied by Google

It is also interesting that e.g. in Vietnam Google is the market leader whereas in the Philippines Yahoo obviously leads the market. And both countries are not English language dominated, I suppose. Any explanations for that?

1. Comparing market share and popularity of Google and Baidu in China

Throughout China, the market share of Google and Baidu has been more or less constant in the last few years apart from some minor shiftings in percentage from year to year. The market shares of 2007 don’t really offer rocking news as well, as you can see in the following graph.

But as more and more information about the Chinese search engine market become available, these numbers can be analyzed more in detail. Especially if broken down to certain areas or provinces of China the market shares of the two search engines vary heavily.

CNNIC reports that they compared market shares in different regions: North, Northeast, East, South, Central, Northwest and Southwest China, involving 3 first-class cities, 7 second-class cities, and 14 third-class cities.

The statistics indicated that Baidu.com has a rising trend as the city level falls, while google.com goes the opposite. The priority ratio for Baidu.com in cities of first, second and third class respectively: 67.33%, 73.35%, 83.82% while that for google.com: 22.11%, 14.78%, 4.99%.

The report also mentions that baidu.com and google.com drew in the priority market competition for high end users characterized by “non-student users aged 25 and above, receiving Bachelor’s Degree and above, having a monthly income of over 3,000 yuan”, 47.72% of whom selected baidu.com as first choice while 42.32% chose google.com.

2. Comparing quality of search results from Baidu and Google

Intelliconsulting, a Chinese research company, conducted a survey among search engine users and compared the search results of Google and Baidu. The overall result is that the search result satisfaction among Google users (48.2%) is higher than among Baidu users (39.8%).

If you take a closer look at the graph you can clearly find out the following facts:

• The better educated users are, the more they rely on Google.
• The older they are (and the more disposable income they have), the more they use Google.
• There is no difference among female and male test users.

More findings were:

• The more a user users search engines, the more he likes Google.
• Negative points for Google are the instability of Google’s website, having no page-caching and no free MP3 and other media search functionality.
• Negative points for Baidu are that search results are mixed with paid search results and that no content from Chinese pages abroad is included. That search results are filtered according to governmental requirements is a negative factor as well, according to the study.

Well, what do you think? Two independent researches (CNNIC and Intelliconsulting) come to almost the same conclusion. That’s impressing, as a little unusual for China.

3. Baidu Keyword Advertising (PPC)

How Adwords, Google’s paid search program, works is pretty much known I suppose, so I don’t want to go into detail too much here.

The screenshot below is from google.cn and the keyword is 汽车(car). You can see that there are several ads, one in the highlighted area above the organic search results.

Here is a screenshot from baidu’s search results for the keyword 信用卡(creditcard).

So let me explain the differences to Google:

1. The paid search and the organic results are not clearly divided. You will only notice the difference by the small gray underlined term next to the displayed URL. 推广 means it is paid search, 百度快照 means organic search result.
2. All paid search results will be placed before the organic search results. That means, if 20 customers buy the same keyword, the first organic search result will be found on page three. The price is based on a bidding process. Not only the CPC but quality factors like landing page evaluation will influence the position as well.
3. The ads in the right column are no CPC-based ads. They are fix-priced for one whole year. Position no. 1 to no.3 have the same price and rotate among each other. Position no. 4 to no.10 are cheaper than no.1 to no.3 and rotate as well. If the position is already booked, you have to reserve and wait respectively until it will become free. There is no possibility to get out of the contract before this one year ends.
4. Once a while you might notice one or two ads with a blue banner on position one and/or two. It looks similar to Google’s blue banner, but in fact it has a totally different meaning: if you search for a keyword and there are no paid results for that keyword because no advertiser has booked it, Baidu will display ads that are similar to the keyword you entered. Example: you enter ‘keyword advertising’ but there are no paid results, so baidu will show two ads for the keyword ‘advertising’ with a blue background.

Last but not least, some examples prices for the right column (as of 2007/11/15):

手机 (cell phone) 1.056.700 RMB/year
广告 (marketing) 13.000 RMB/year
汽车 (car) 117.600 RMB/year
美容 (cosmetics) 193.600 RMB/year
电脑 (computer) 16.400RMB/year

The long tail approach is also applicable for search engine marketing (SEM) and search engine optimization (SEO). In the following I will explain it for both marketing channel. But let’s start with some facts that are valid for SEM and SEO as well.

A typical search pattern goes from frequency keywords to long tail keywords. Take as an example a young couple that wants to buy a house. They need money, so they search for loans:

1. search: loans
Type: frenquency keyword
What do they get? Very unspecific information from car loans to house loans, maybe even credit card offers. So they’ll have a new try:

2. search: house loans
Type: frequency keyword phrase
Now they get some valuable information about house loans, some interest rates from banks that are spread throughout the country, but nothing which makes them say: That’s it, let’s do it. So they have to go deeper:

3. search: compare house loans
Type: long tail keyword
Now they already have an overview of the interest rate range for house loans and know some banks that might also be located in their region. But they need a bank that is close to them, so they go even deeper:

4. search: compare house loans in Jacksonville
Type: long tail keyword
They finally found a website which compares all house loan interest rates in their hometown.

Other examples for long tail keyword searches could also be:
cheap house loans in Jacksonville, bank with low-interest house loans in Jacksonville,

Drawn as a graph, the above mentioned example would -for a whole website of course- look like this.

So, you are the bank and the advertiser, when do you want to become aware to the young couple?
One possible answer could be: the earlier, the better. This is when the bank is a big national player and has the goal to use search engines as a sales channel and for brand communication. They want to be found with the keyword „loan“ and pay a premium for many views and clicks but limited conversion. They see it as an investment into their brand.

A local loan broker would answer the question possibly like this: only in the 4th step with the keyword „compare house loans in Jacksonville”. He wants to be as close to the sale as possible. Any awareness before that just costs budget but doesn’t bring conversion which is totally uninteresting for him.

These two examples represent only the both extreme approaches of the use of search engines. Of course, in most cases they are mixed.

Search engine optimization (SEO)

The example above is a typical search pattern and normally up to 50% of the search engine traffic of a website is generated from these long tail search queries. For blogs the percentage can be even higher, up to 70-80%. Only a few websites that are ranked on page 1 for a frequency keyword will generate major traffic with frequency keywords.

As search engine optimization for page one or two for frequency keywords and keywords phrases is a really tough and long-lasting job, it is a good approach to start search engine optimization for long tail keywords first. This has several advantages:

1. faster results
For most long tail keywords there is only very limited competition. Due to their specific nature, only these advertisers who have a real interest, meaning who really offer the service or product, optimize for these keywords. For many others, especially professional SEOs, they are not so interesting to optimize for because the big money is promised with optimization for frequency keywords.

2. higher quality
Because long tail keywords are mostly very specific, a person who searches for them already has developed a certain, often deeper interest in this product, service or kind of information. This means the quality of the search phrase is higher and thus the likeliness for a conversion increases.

Search engine marketing (SEM)

For SEM campaigns the distribution of search frequency is often more frequency keyword centric because it is easier, though expensive, to get on page 1 with these keywords due to easy keyword booking. Experiences show that you can achieve with the frequency keywords, which by the way are often not more than 10 to 20 for one product or service, a relevant amount of traffic. But this traffic is often lower quality and results in higher cost-per-order (CPO).

Why lower quality? Because a search term like „loan“ is very general and can thus imply anything from information search, scientific interests, student’s research for a term paper or a purchasing desire. This is not clear in the first search step but becomes only clearer the deeper the search pattern goes.

Another point you should consider is that Google’s broad and extended match – which is often used – answers long tail keyword searches with frequency keyword bookings. This results in a dilution of the keyword reports because the reports will only include the keywords that were delivered by Google but will not show the actual search terms of the search engine users. It means that if a user makes a search for a long tail keyword like „lowest loan rates around Jacksonville“ but you only booked „loan“, your ad might be shown on basis of the keyword „loan“. In your report you will only see a click for „loan“.

Let’s make an example. A bank who wants to sell loans in their bank branches decides to use the Internet for the generation of customer addresses. They use search engine marketing and book 1000 keywords. 20 of them are frequency keywords and frequency keyword phrases. The rest are long tail keywords. Here is an overview how impressions, click-trough-rate (CTR), cost-per-click (CPC) and cost-per-order (CPO) of this SEM campaign could look like: