Mark Tanner
Mark Tanner
10 July 2019 0 Comments

Last week, a man surnamed Cheng burst onto the stage at Baidu’s AI conference and upended a bottle of water over Baidu’s CEO Robin Li. Cheng’s bold act was applauded by many online patrons and was representative of how many Chinese consumers have become frustrated with the performance, ethics and privacy from China’s leading search engine; particularly as the Googles of the world are shut out.

In 2016, Baidu was slammed by consumers and the authorities after a university student died of cancer following subpar treatment from a hospital that had paid for an elevated listing in the search engine’s results. Just last month, Baidu was again censured for promoting fraudulent college application services. A state education department warned students to avoid using search engines when seeking the official university application website as they may be misdirected to an unofficial website which leaks personal information, while not even providing valid applications.

Yet it isn’t just Baidu who is untrusted. Highly trafficked search engine 360 Search was also summoned by China’s Ministry of Education and Ministry of Public Security for linking to the dodgy application services from paid advertising. Just last month, popular search engine Sogou was fined $4.37 Million for ‘unfair competition’ after directing users to its own site using suggested search pop-ups on its keyboard, even when users were trying to input keywords into rival search engines.

These are just a few misdemeanours contributing to why search engines are not nearly as relevant in China as they are in other countries. Last year Google topped the BrandZ Most Valuable Global Brands and YouGov Global Brand Health Rankings, among many others. On the other hand, Baidu’s market has dropped from 86% in August 2015 to 64% in May this year. Baidu reported its first net loss in Q1: nearly ¥330 million ($48 million). Following its worst performance since listing in 2005, Baidu’s CEO Robin Li began restructuring its management team. At least seven top executives have left Baidu this year including president of new business Zhang Yaqin and senior vice president of the search business Xiang Hailong.

At China Skinny, we still hear from numerous brands seeking a plan for Baidu as the key pillar of their China marketing strategy. Whilst Baidu can be an important touchpoint in the customer journey for many categories, in most cases, it is secondary to other digital channels such as WeChat, ecommerce and even relative newcomers such as Douyin.

Digital ad spending is forecast to grow 22% in 2019. While Baidu’s share is shrinking, Alibaba’s ad revenue is forecast to be $27.3 billion – 63% greater than total ad spending on TV. According to emarketer, digital ad spending is expected to account for 69.5% of total media ad spend this year, and Alibaba’s digital advertising revenue will be more than double that of Baidu’s.

Why is Alibaba’s ad revenue more than twice the value of China’s biggest search engine? One reason is context. When you are searching on an ecommerce platform, your target market is typically much closer to the point of purchase, so your ad spend is more likely to result in a sale. Secondly, as well as purchases, Chinese consumers use ecommerce platforms for research – often instead of search engines. This is because Chinese ecommerce pages contain so much valuable information, results contain user generated reviews, and are more organic than the paid placements on Baidu. In short, they are more trusted. In China’s inherently untrusting society, whether it be ecommerce search results or KOL endorsements (even though most are dishonest), Chinese consumers are more likely to respond to sources that they can trust. Brands should aim to understand those trusted touch points and have a strong presence across them – something China Skinny can assist with.

On the subject of untrusted online sources, we have heard from a few people who have registered for the 2019 China Digital Conference advertised in Melbourne on 31 July. The site claims that China Skinny’s Mark Tanner is the conference chair and the esteemed Matt McKenzie and Benjamin Sun will also be speaking. We can confirm that Matt, Ben or Mark were unaware of the conference and the advertised venue does not have a booking on the said date. We’re sorry for those who purchased tickets, and hope there is a path of recourse to get your money back. China Skinny is lined up to be back speaking in Melbourne in September, so hopefully we can share some of our insights and views on the China market then. Go to Page 2 to see this week’s China news and highlights.

Go to Page 1 Go to Page 2