Baidu — A Sleeping Giant Awakens

The name “Baidu” comes from an 800-year-old Chinese poem referring to one man’s passionate search for his lover in a festival crowd. Eight hundred years later, that festival crowd has swelled to 298 million online people. That’s just about the population of every man, woman, and child in the United States.

And there’s still potential for more growth in China. According to China Internet Network Information, they’ve only reached around 23 percent of their inhabitants, whereas other modern Asian nations average 70 percent penetration rate of their population online.

According to Chinese research firm iResearch, Baidu, the search engine of choice for this dynamic culture, continues to lead the market with a solid 73 percent market share in comparison to its closest rival, Google (a.k.a. “GuGe”) with 22 percent.

As an international online advertiser, it would be tough to ignore the scale of this search engine. However, there are some long-overdue changes coming from the Chinese Internet giant that will likely impact short-term advertising results for better long-term results.

Bid Rank

Before Baidu was even a twinkle in the eye of its founder, in February 1998, the U.S.-based paid search engine offered advertisers one of the first models of bidding for placement. Their search engine had no right-hand column, nor did it have a special “sponsored” section. All paid results were simply placed on top of each other with organic results following when it ran out of advertisers.

Baidu’s legacy model, which they’ve termed the “Classic Edition,” is very similar to, with paid links appearing as the top search results followed by the organic search listings. The only difference is that they point out if the listing is a paid or an organic result, although it isn’t really clear to users. The right hand column is different as well; most of the links are based on a flat monthly fee with some broad match paid ads following them.

Baidu Classic

Soon things would change. Heavy advertiser and consumer criticism, plus Baidu’s profit-per-search revenue being nowhere close to Google’s, forced the company’s management to take a second look at their model and to come up with a new solution. This new system, known to Baidu as “Phoenix Nest” (Fengchao), looks and behaves a lot like Google’s AdWords program.

Phoenix Nest

Baidu’s Phoenix Nest platform (a.k.a. “Professional Edition”) reduces the total amount of paid links appearing together with the organic search engine results. It offers at least the top three positions, as well as the right side column, for paid links.

The new system display looks nearly identical to Google’s AdWords. However, the sophistication behind Baidu’s ranking methodology may be far inferior. Although it’s too early to tell if there are factors beyond automated CTR analysis and bid pricing, some human intervention may also be an aspect for positioning.

Baidu Phoenix Nest

The transition to Baidu’s Professional Edition for customers began in June. Based on some early results with some of our own clients, we’ve seen search volume decline from the positions that used to be in the main search results, but now on the right column. Moreover, organic results are providing much more traffic then ever.

Although there is no official Baidu editorial guidelines document for the Phoenix Nest system, Baidu provided us with the following system limitations:

  • Title: 13 Chinese characters
  • Ad Copy Line 1: 18 Chinese characters
  • Ad Copy Line 2: 18 Chinese characters
  • URL with Tracking codes: 1,107 English characters
  • Display URL: 26 English characters

Sleeping Giant Waking Up?

Is this a potential disaster for Baidu, or could it be a blessing in disguise? In the short term, it would probably be in Baidu’s best interest to carefully evaluate user behavior so users understand that the right column is now relevant to their search.

Chinese users who have become accustomed to ignoring the right column, as the relevancy wasn’t nearly as strong, may be less inclined to even notice the difference. At the same time, Baidu has created a spammers dream for organic results. For example, the Baidu algorithm is not as sophisticated as Google’s — the engine factors the quantity of links rather than quality of links as one of the determinations in ranking.

Considering the risk, will this drive users away to the Google China search engine? Is this perfect timing for Microsoft’s Chinese version of Bing to enter the market? Are we witnessing what happened to Yahoo in the U.S., about to happen to Baidu?

To the Chinese, Baidu is to them what Google is to many of us in the United States, a company they’re very proud to call their own; it almost touches them in a patriotic way. It will continue to grow and the new changes most likely won’t make a dent in terms of market share. Yet Baidu potentially faces some risks in short-term search revenue if people don’t click on the right-column results.

In the long term, it’s likely to be a blessing in disguise; people will get used to the new platform and may even favor more relevant paid links over potentially spam-ridden organic links. Advertisers put in a more competitive environment would move to further sophistication, driving up CPCs and finding a new need for the use of stronger analytics.

Join us for Search Engine Strategies San Jose, August 10-14, 2009, at the McEnery Convention Center.

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