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Report From The Field: Search In China 2008
We’re wrapping up SMX China in Nanjing this afternoon. By all measures, the show was a success, with about 300 attendees and a dozen exhibitors, with people from China as well as many other Asian countries, India, Israel and even Africa in attendance.
Search in China is thriving, seemingly impervious to the economic turbulence that’s buffeting most of the rest of the world. There are several reasons for this—some obvious, some surprising—but the net takeaway is that China is poised to become an even more important market for search marketers once we’ve passed through this period of global slowdown.
What follows are impressions and observations from the two-day SMX Nanjing conference, with a focus on interpreting what’s going on in China for those who are either simply interested in following the state of search in the country, or for those looking to take the plunge by getting directly involved in this vibrant market.
The state of the Chinese market
I’ve been involved with organizing and moderating search marketing conferences in China for the past three years. Each time we run a show, the level of sophistication here marks a notable increase, both in quality of presentations and in the questions asked by attendees.
While many people here acknowledge that search marketing in China is “behind” the western world by three or four years, there are some key potential catalysts surfacing that may close that perceived gap much more quickly than many would expect. For example, unlike in western markets, where a majority of search marketing efforts have focused on direct response, conversion-oriented campaigns (e.g. selling stuff online) most search marketers in China until recently were simply promoting internet or online businesses, looking to drive traffic to web sites. “Conversion” is still a relatively unknown concept or goal for many Chinese search marketers.
But that’s changing. E-commerce is still in its infancy here, due to the relative immaturity of online payment systems, lack of infrastructure to sell and fulfill online, as well as a cultural tendency to prefer offline transactions in China (at least on the B2C side; by contrast, Alibaba is a global powerhouse in the online B2B marketplace). But slowly, non-internet industries are adopting search marketing, led by the automotive and electronics industries, but also, notably, others including real-estate, financial services and other categories that are essentially “long-tail” marketers that rely on multiple touch-points to influence consumers.
Another key shift is Chinese user preference migrating from portals, such as Sina and Sohu, to search engines. This is exactly what happened in the western world in the mid-to-late nineties, when users rebelled against walled-garden or “sticky” portal sites and adopted Google’s approach of directing people quickly to the best sites regardless of affiliation. The same shift is occurring in China, with search engines taking dramatic market share away from once-dominant portal sites. That, in turn, has led marketers and advertisers to take a greater interest in search-related opportunities and less interest in traditional display advertising options.
Both small and large firms are increasingly embracing search marketing in China, according to Fu Xinghua of Beijing-based market research firm Analysis. Large enterprises have increased expenditure in online marketing in the past year, using search marketing as a “last mile” tool to get more closely connected with consumers, and also as a relatively low-cost alternative to traditional forms of media. And small and medium-sized businesses (SMEs) in China are taking the plunge by getting involved with search marketing for the first time in a meaningful way, she said.
This is significant, because the majority of businesses in China are SMEs. The Chinese National Development and Reform Commission, polled SMEs in China recently and found that they had reached 6.58 trillion yuan ($US 954 billion) industrial output in the first five months of this year. Their profits increased by 30.8 percent from a year ago to reach 625.8 billion yuan ($US 92 billion). These folks have some serious change to invest in search marketing, especially in a market like China where costs are significantly lower than most western markets.
Keynote: Microsoft’s KSP – Keyword Service Platform
Zhaohui Tang, Principal Group Program Manager, Microsoft adCenter, kicked off the conference with a keynote address unveiling Microsoft’s new online services platform, designed to be a powerful suite of tools to help search marketers do their job more effectively, improve ROI on campaigns, and perhaps most importantly, add an unprecedented level of transparency to all areas of campaigns, from the true costs of keywords to more finely-tuned and specific traffic measurement and conversion reporting.
The KSP (keyword service platform) is an online service that works seamlessly with Excel 2007, blending the power of Microsoft’s huge data centers with the simplicity and familiarity of the spreadsheet program just about everyone is familiar with. The suite is made up of more than 20 tools related to keyword research. Tang demonstrated many of these tools, and all looked slick and powerful. Several caught my eye as being particularly useful. One was a keyword extraction tool, which performs keyword expansion based on analyzing your content and determining probable relevance of suggested terms based on category, demographics, age and other factors gleaned from the massive amounts of user behavior data Microsoft has collected over the years.
Another tool creates visualizations of potential “search funnels” based on where searchers might be in a buying or conversion cycle. Another, which can save tons of time for search marketers, is a text advertisement writer, that uses both suggested keywords and landing page copy to rapidly generate text ads that are projected to have superior click-through and conversion potential.
All of these tools are available for use with both Microsoft search advertising campaigns as well as campaigns with other search ad vendors. Tang said Microsoft is committed to upping the ante when it comes to opening up data and information to search marketers. “Transparency is part of the DNA at Microsoft Live Search and digital advertising solutions,” he said.
More information, including free registration for an invitation to try out the beta KSP platform, is available at Microsoft’s Keyword Services Platform page.
Key trends: Search in China
Baidu dominates. Regardless of whose stats you use, Baidu remains the dominant search engine in China with well over two-thirds share of the market. While Baidu does search the web, its business model relies largely on a paid-inclusion approach that includes a large number of paid placement results intermingled with some organic search results (it also offers sponsored links). Baidu’s position has strengthened, according to advertisers here, to the point where it has largely eliminated discounts and favored pricing and has been able to increase its rates by as much as 100% over the past year.
The buzz around Baidu centered around its forthcoming “Phoenix Nest” sponsored listings program. I don’t have details on this new program, but will report on it when it launches, reportedly sometime during this quarter.
What about Google? The dominant search engine elsewhere in the world is gaining traction in China, but it appears that Google’s gain is at the expense of Yahoo and the aforementioned portals rather than from taking share from Baidu.
Most search campaigns in China are small-scale. Jason Lei, vice president of paid search management software solution provider adSage, said that 77% of advertiser campaigns on Baidu employ just 200 or fewer keywords; the average is 50 keywords or less for all advertisers. There are some major campaigns running in China, but most of these appear to be managed by agencies that have access to sophisticated systems and tools not available to most search marketers in China.
The rise of branding & reputation management. The recent Beijing Olympics seems to have been both an influence and trigger for using search marketing for both branding and reputation management in China. As noted, search marketing was previously used primarily to drive traffic to online destinations. But with the variety of high-profile offline and online branding efforts that happened preceding and during the recent Olympic games, marketers have realized that search marketing provides a very cost-effective means to reinforce branding messages.
And despite media reports to the contrary, the blogosphere is alive and thriving in China, largely unfettered by official attempts at control or censorship. And just as elsewhere, comments that can spread like wildfire in the blogosphere can end up in prominent positions in search results. Search marketers in China are increasingly responding to this by engaging in reputation management campaigns. A timely example is the spoiled milk scandal that’s causing furor in the blogosphere, where a number of search marketers are engaged in attempting to alter perceptions through active search and social media marketing campaigns.
Mobile search is exploding. The Chinese government has cracked down on text-messaging spam, while at the same time relaxing certain controls on the type of content that can be distributed over mobile networks, stimulating an increase in user expectations for what’s available on mobile devices. According to Gavin Hu, vice president of marketing and sales for Shanghai-based consultancy mInfo, mobile search is adapting to consumer needs by moving more to a “pull-ad” model based on user behavior and opt-in requests rather than more general “push-ads,” which aren’t as targeted.
Mobile search differs from web search, in that mobile searchers are looking for instant gratification. And mobile phones are very personal gadgets, so mobile search requests tend to represent personal needs, rather than the broad needs that general-purpose web search attempts to accommodate. And the rapid expansion of 3G networks that can rapidly pump rich media through smartphones and iPhones should accelerate the adoption of mobile search, according to Hu.
A shortage of talent. Just as with the rest of the world, search marketers in China (both large companies as well as agencies) are scrambling to find qualified, experienced talent to employ as in-house search marketers. And many experienced people are recognizing opportunity and scratching their entrepreneurial itch by starting their own independent search marketing firms. Given the nascent and relatively undeveloped state of the search marketing industry in China, opportunities for qualified people abound.
Yahoo China’s disappearing act. Back in August 2005, Yahoo effectively ceded control of Yahoo China to Alibaba.com in exchange for a 40% stake in the Chinese online auction site. Since then, Yahoo China has all but disappeared as a major player on the search scene in China. Just as in the U.S., there’s been an exodus of Yahoo China employees to smaller firms, even while parent Alibaba has paradoxically emphasized that the future of the company will be very search centric. With all of the turmoil caused by Microsoft’s attempted acquisition and events elsewhere, you have to wonder if Yahoo on a global basis has entered its ultimate swan-song.
The bottom line for global search marketers
Given all of the favorable trends and positive growth in China, is it time for global search marketers to take the plunge and launch campaigns in China? Unfortunately, there’s no one-size-fits-all answer to that question. It’s probably best to frame the answer with a list of positives and negatives that should help inform any decision you make.
- China is of the largest markets in the world, with the most online users of any country (~250 million and counting)
- Increasing use of search engines by Chinese internet users
- Comparatively inexpensive options for search marketers in relation to other markets in the world
- Relative lack of sophisticated competition; relative ease of capturing top positions in both organic and paid search result listings
- Relative complexity of Chinese language (and multiple dialects) requires sophisticated knowledge and/or strong partnership with local marketing experts
- Lack of transparency on the part of market leader Baidu requires good relationships with company reps or agencies with good connections
- Lack of maturity in E-commerce poses challenges for direct-response or retail oriented search marketers
Establishing a search marketing campaign in China should be a no-brainer for major brands that are seeking to increase market share in China. The payoff likely won’t be immediately measurable, but over time branding efforts via search should pay huge dividends at remarkably affordable cost. For any other marketers, China has now become an attractive enough option to merit a close look, and for those who don’t mind taking a certain amount of risk, establishing a search marketing campaign in China now could pay at least modest dividends in the short run, with potentially huge returns in the long run.