Current State of Search Engines, Social Media and Ecommerce in China

IT in China:
Current State of Search Engines, Social Media and Ecommerce in China as an Online Marketing Medium
By: Benj Arriola
Assignment 4 April 11, 2012 MBA ISYS368 University of Redlands
Global Information Systems Prof. Mark Gruber
IT in China: Current State of Search Engines, Social Media and Ecommerce in China as an Online Marketing Medium
The Peoples Republic of China is one of the fast developing nations whose economic growth had been catching up with the rest of the world in the past decade. To understand the current state of search engines, social media websites and ecommerce in China, it has to be placed in the proper perspective, starting with an overview of Chinas Internet users, and then looking into the major players in Chinas Search Engine, Social Media and ecommerce industry. Considering the technology, the maturity of the market, and how online marketing is done within China there are three poignant factors that are to be taken into account. These are as follows: a) marketing within China by Chinese companies to the Chinese consumers b) Chinese companies marketing to other countries (export) c) Foreign based companies marketing within China (import) using search engines, social media and ecommerce.
Overview of Chinas Internet Users
Figure 1: GDP Growth as an economic indicator, showing the smaller difference between the US and China in the more recent years. Data from The World Bank, World Development Indicators. Chart generated by Wolfram Alpha.
Compared to the US, its land area only has a difference of roughly 70 square miles, but with a large difference in population. China 3.601 million sq. miles (world rank: 2nd) 1.35 billion people (world rank: 1st) 376 people/mi2 (world rank: 80th) United States 3.537 million sq. miles (world rank: 3rd) 309 million people (world rank: 3rd) 87.3 people/mi2 (world rank: 187th)
Land Area Population Population Density
Table 1: Large difference in population density between the US and China. A larger population may be correlated to a larger online market. Data from The World Bank, World Development Indicators as of 2010.
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IT in China: Current State of Search Engines, Social Media and eCommerce in China Assignment 4 ISYS368W MBA University of Redlands Benj Arriola Research Distributed Online Through Search Marketing & Social Media Company, http://www.internetmarketinginc.com/
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China, having a higher population may be associated with a higher amount of Internet users, but this assumption cannot be viewed as such since it is a fact that urbanization in this country is highly inconsistent with the whole population and total land area. There are some places in China that are very developed with high-rise building but they also have a vast rural farm lands. And typically, rural areas may not have a computer or a personal Internet connection. To verify the correlation of population and amount of Internet users, based on compiled statistics as of 2010 by Wolfram|Alpha1, online internet users in China is almost double the users of the United States!
Country China United States
Internet Users 460.1 million 245.2 million
Relative Values Ratios Comparisons 1.876 1 87.63% larger 1 0.533 46.7% smaller
Table 2: Comparison of amount of Internet users in USA and China as of 2010. Data from Wolfram|Alpha Knowledge Base 2012.
Figure 2: Growth of Internet users in China and the United States. Starting 2007, Chinas Internet user population started to surpass the US Internet user population and has continuously increased the gap year after year. Data and chart generated by Wolfram|Alpha.
Given that China has a large inconsistency of urban and rural areas, the Internet users are primarily the urban Chinese residents which make of the total Internet user population in China, are from the rural areas.
Wolfram|Alpha Knowledge Base 2012 & Wolfram Mathematica Country Data URL: http://www.wolframalpha.com/input/?i=china+vs+US+internet+users
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Figure 3: Comparison of Internet users in urban and rural areas of China. The Internet penetration rate on the total population is about 60%. 45% in urban areas, and 15% in rural areas.2
Although the amount of urban Internet users in China is 3 times higher than the rural Internet users, the younger elementary and junior high school Internet user age group is dominated by the rural areas, most of which are the online gaming users.3
Figure 4: Education Levels of Urban and Rural Internet Users in China
China's Digital Divide - Differences in Urban and Rural Chinese Internet Users 2010 Tait Lawton, East-West-Connect.com: China Internet Marketing Blog by Nanjing Marketing Group, URL: http://www.east-west-connect.com/urban-vs-ruralchinese-internet-users-2010 3 China's Digital Divide - Differences in Urban and Rural Chinese Internet Users 2010 Tait Lawton, East-West-Connect.com: China Internet Marketing Blog by Nanjing Marketing Group, URL: http://www.east-west-connect.com/urban-vs-ruralchinese-internet-users-2010
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Figure 5: Age Distribution of Urban and Rural Internet Users in China
Difference Urban Category Purpose Usage Rate Rural Usage Rate Between Urban and Rural Usage Rates
Business Business Business Business Communication Entertainment Communication Business Information Gathering Stock Trading Banking Online Payment Travel Booking Forums Gaming Blogging Shopping Search Engines 16.90% 27.70% 27.70% 9.40% 32.90% 68.60% 58.40% 31.70% 75.90% 8.50% 15.20% 15.10% 3.30% 23.30% 69.90% 55.50% 17.60% 66.50% -8.40% -12.50% -12.60% -6.10% -9.60% 1.30% -2.90% -14.10% -9.40% 153.70% 103.20% 101.70% 60.20% 48.00% 47.50% 45.10% 44.70% 43.30%
Annual Increase in Rural Usage
Annual Increase in Urban Usage

54.80% 55.10% 72.30% 80.20% 21.90% 39.40% 33.80% 44.60% 37.50%
Search Engines, Social Media or ecommerce usage

ecommerce ecommerce ecommerce ecommerce Social Media Social Media Social Media ecommerce Search Engines Social Media & Search Engines Social Media Social Media Social Media Social Media Social Media Social Media
Information Entertainment Communication Communication Entertainment Communication Entertainment
News Music Email Instant Messaging Video SNS
82.80% 83.80% 61.00% 71.90% 64.50% 14.20% 42.70%
72.40% 82.70% 44.60% 68.20% 57.30% 12.10% 41.20%
-10.30% -1% -16.40% -3.70% -7.20% -2.10% -1.60%
33.20% 29.20% 25.10% 21.30% 19.90%
30.60% 28.40% 28.70% 21.20% 18.60%
Table 3: Internet usage percent penetration of total population in China based on the study by CNNIC and published by Nanjing Marketing Group.4 The added green column shows where each purpose can be tied specifically to the usage of search engines, social media sites and ecommerce sites.
4
China's Digital Divide - Differences in Urban and Rural Chinese Internet Users 2010 Tait Lawton, East-West-Connect.com: China Internet Marketing Blog by Nanjing Marketing Group, URL: http://www.east-west-connect.com/urban-vs-ruralchinese-internet-users-2010
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Chinas Major Search Engines, Social Media Sites and Ecommerce Sites
Chinas Search Engines China has quite a number of local search engines, below is a partial list of search engines in China: Baidu www.baidu.com China Central Television www.cctv.com Panguso (God of Search) www.panguso.com Sogou www.sogou.com Zhongsou www.zhongsou.com
Most are rarely known to non-Chinese search engine users. The only search engine to gain some attention outside of China is Baidu. For a very long time, comScore has been monitoring market share of the different worldwide search engines and Baidu has always ranked 3rd where Google was 1st and Yahoo 2nd and Microsofts MSN/Live/Bing was 4th. But starting 2009, Baidu has surpassed Yahoo in terms of worldwide market share and became the second largest search engine based on search engine usage.5 Back in 2009, Nanjing Marketing group conducted a research on the search engine market share between Chinese search engines alone6, Baidu emerges as the top search engine at 77.2%, and a very far second is Google at 12.7%. 3rd, 4th and 5th are Soso, Sogou and Yahoo respectively all at less than 5%. Within the same year, China has blocked off access to all Google services which even increases the market share of Baidu in China. Baidu has also expanded outside of China, and runs Baidu Japan, but this has not made a strong impact yet on the Japanese Internet community. And based on recent reports, smartphone mobile users in China now have Baidu as the default search engine on Android OS phones.7 Chinas Social Media Sites If Chinas leading search engine, Baidu has a somewhat similar look and feel to the US leading search engine, Google; similarly Chinas leading social media site, Renren.com is somewhat similar to the US leading social media site, Facebook. The top 3 Chinese social media sites are: Renren (Translated: Everybody) www.renren.com
(Translated: Happy Network) www.kaixin001.com

51.com www.51.com
Renren, being Facebooks counterpart in China was originally launched as Xiaonei, which means on campus had a very similar look and feel as Facebook, to the point that any first time visitor would actually wonder if the site was owned and run by Facebook. Re-launched as
Global Search Market Draws More than 100 Billion Searches per Month 2009 Andrew Lipsman, comScore, URL: http://www.comscore.com/Press_Events/Press_Releases/2009/8/Global_Search_Market_Draws_More_than_100_Billion_Se arches_per_Month 6 China Search Engine User Behavior Research Report 2009 - Summary 2009 Nanjing Marketing Group, URL: http://www.nanjingmarketinggroup.com/knowledge/china-search-engine-report-2009 7 Baidu launches its own Android-based mobile OS in China, leaves out Google search and services 2011 Christian Zibreg, 9to5Google URL: http://9to5google.com/2011/09/05/baidu-launches-its-own-android-based-mobile-os-in-china-leaves-outgoogle-search-and-services/
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Renren in August 2009, the site has evolved and changed in appearance, but still has a strong resemblance to Facebook. With Renren as the overall social media leader in China, Kaixins main user base are mostly the wealthy users and large corporate users. Contrasting to Kaixin, is 51.com whose users are mostly from the rural areas of China.8 Similar to Google in China, Facebook is also blocked in China, so Facebook is not even considered as a competitor of these 3 major social networking sites in the said country. Chinas Ecommerce Sites In the United States, almost any company today has some type of online presence and it is almost imperative for the retailers to sell their products online. For smaller business that cannot afford their own infrastructure or want to ride on the popularity of ecommerce hubs online, opt to use Amazon or eBay. Although these are the two main ecommerce leaders in the US in general retail, for specific niche industry products, there may be other ecommerce website leaders. Similarly in China, there are also many ecommerce sites. The main 3 leaders are 360buy.com, M18.com and Amazons Joyo. Unlike in the search engine and social media industry where the US respective giants, Google and Facebook are not present in China, for Amazon, they have a separate store specifically for China called Joyo that uses the domain name amazon.cn.
Figure 6: Top 10 Chinese B2C ecommerce Sites by Visits Stickyness9
Although from a B2B perspective, there are a whole different set of ecommerce sites that are popular in China. Being outsource manufacturing hub of the world, most probably, other countries would interact with China through these B2B ecommerce sites. In a research by China B2B Research Center shows that the number of B2B ecommerce sites have increased
China's Top 3 Social Network Sites 2010 Richard McManus, ReadWriteWeb URL: http://www.readwriteweb.com/archives/china_top_3_social_network_sites.php 9 Top 10 Chinese E-Commerce Sites by Stickiness, Customer Loyalty 2011 Steven Millward, TechInAsia URL: http://www.techinasia.com/china-top-ten-ecommerce-sites/
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from zero to more than 5,000 B2B ecommerce sites over a span of 12 years dating back in 1997.10
Top 10 B2B Ecommerce Sites Alibaba Made-in-China.com Global Sources Tootoo DIY Trade China.com UnsBiz MySteel
www.alibaba.com www.hc360.com www.made-in-china.com www.globalsources.com www.tootoo.com www.diytrade.com www.china.com www.yidaba.com www.unsbiz.com www.mysteel.com
Table 4: List of top 10 B2B Ecommerce sites compiled by Steven Chow of China Online Marketing.
China has already reached a very mature stage in the search engine, social media and ecommerce industry. The search engines and social media sites rival their US counterparts in worldwide market share, size of audience and robustness. Their business models also run in a similar manner, where search engines and social media sites are driven by Pay-Per-Click (PPC) advertising and ecommerce sites are driven by revenue from a percent of sales prices of the products sold online. Online company giants Baidu and Renren are also publicly traded companies in the US stock market.
Online Marketing Using Chinas Search Engines, Social Media & Ecommerce Sites
The Chinese Internet population has extensively used search engines, social media sites and ecommerce sites making these sites continuously grow and succeed over the years. This growth clearly signifies the value of these sites to the Chinese Internet users, which also translates to the value gained by the websites stakeholders as a reflection of their success that is directly proportional to their profitability. Merchants selling products online also benefit from these websites as they serve as platforms of social media advertising for exposure, search engine marketing for increased sales and ecommerce platforms for order fulfillment where all three work symbiotically. Online marketing to the Chinese Internet users using search engines, social media sites and ecommerce sites involve the following online marketing strategies: a) For Search Engines: a. Search Engine Optimization (SEO) b. Pay Per Click Advertising (PPC) b) For Social Media: a. Pay Per Click Advertising (Social Media Marketing or SMM)
10
Top 10 B2B ecommerce websites in China 2010 Steven Chow, China Online Marketing URL: http://www.china-onlinemarketing.com/news/e-commerce/top-10-b2b-ecommerce-websites-in-china/
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b. Community and Audience Development (Social Media Optimization or SMO) c) For Ecommerce: a. Conversion Rate Optimization (CRO) b. Shopping Feed Optimization These three strategies vary depending on the situation and the main focus changes on a case to case basis. 3 distinct situations that vary these strategies would be: a) China marketing to China b) Foreign countries marketing to China c) China marketing to foreign countries. China Based Companies Selling to China Residents
SEO and PPC As long as search engines exist, SEO and PPC will also exist. PPC is the existing
advertising model most search engines use. If a company wishes to post advertisements in the form of paid or sponsored listings, merchants pay the search engine company where the position of the ads are based on a combination of an auction and quality score of a page. There are many advantages in ranking in the natural or free or organic listings and being the number 1 ranking site. In numerous studies, it has been fairly consistent where organic listings are clicked from either 3 to 5 times more than sponsored PPC listings. Although PPC listings give the advertisers a stronger level of control and ability to instantly gain ranking results with measurable ROI. It would be improper to compare SEO and PPC and say one would be better than the other; both have their own strengths and weaknesses and this would not be properly comparing apples to apples.
Figure 7: Simple comparison of search results from Google and Baidu. In this example, a consumer product was used as a keyword (laptop computer). In both screenshots different types of results are highlighted and labeled.
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In Figure 7 above, search results for the keyword: laptop computer is compared on both Google and Baidu. Table 5 below show the main differences that affect the selling of products online. Feature Dictionary Results Google Does not display the definition. Baidu Displays the definition. Marketing Benefit
Definitions help users learn definitions of keywords. Although Google also has this feature, Google only displays this if the intention seems to request the definition. The laptop computer keyword is a common word and seems to have more of a buying intent. Google has the sophistication to determine what words have a buying intent and definition intent and adjust results accordingly. Thus prioritizing shopping heavy results, thus help increasing sales of the product from shopping sites. Although users tend to think personalize results which are based on cookies and user behavior which can be somewhat an invasion of privacy, at the same time, results based on personal friends in the same social network Social+ serve as personal recommendation results from real friends. And recommendations from friends are usually trusted and non-biased excluding all unnecessary sales talk. Again Google helping out in making sure people do click on these search results, and possibly increasing sales. Laptop computers are a very common user appliance, the amount of ads on Google shows how competitive the online market is. The fact that many companies are advertising proves that this medium is an effect way of selling online. Baidu with only 1 ad shows the weak confidence of the merchants to pay Baidu and get a sponsored listing. Although Baidu does display ecommerce sites in its organic results, it is treated like any other webpage. The totally separate shopping results of Google may display thumbnail images, pricing information, reviews and ratings, related products and related brands. All of these help in the buying decision of a customer and increases sales of these products.
Personalized Results
Highlights results from common friend recommendat ions found on Google+ Has a fully occupied ad space.
There is no personalized results.
PPC Ads
Has only 1 ad displayed.
Shopping Results
Displays shopping results leading to popular ecommerce sites. Does not exist.
Bing Results
Has no shopping results, but the organic listing include some ecommerce sites. Baidu allocates a portion of the screen real estate to Bing China results.
Microsoft has some partnership with Baidu where there are some Bing china results that appear on Baidu. The problem is the results do not seem to make it more relevant. And the results are not strongly geotargeted. Most of the results did not even include China-based companies. They were US based results like Wikipedia US, Best Buy results and other US based websites.
Table 5: Observed differences between Google and Baidu for the keyword laptop computer.
The comparison with Google was to identify other opportunities Baidu may do on their search engine results page (SERP) to help improve user experience, user retention and merchant attraction. But since Google does not exist in China, and the industry is monopolized by Baidu, most users of search engines have no choice but to use Baidu even if the search user experience may be inferior to Google. Google is not viewable in China thus Baidu would still be the best performing search engine that China. China based merchants can maximize its usage for the best profitability from search engine traffic.
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Social Media PPC and Community Audience Development With the growing success of
Renren and other social media sites in China, the large user base and user engagement would greatly benefit merchants. Although comparing this to search engine benefits, the success of social media marketing would be based on proper ad targeting based on demographic data. In SEO and search engine PPC, your strategy revolves around keywords, targeting words that people are searching for. The main fact that users are searching for a product or service increases the likelihood of the users to buy a companys product or service because of the simple fact they are searching for it. In social media, the users are not necessarily in search of a product or service, thus users are not really in a buying mode which can be a disadvantage compared to SEO. Although like any other social media site, it also has advantages for merchants. Power of User Recommendations: Buyers tend to buy based on user recommendations. Especially if the recommendations come from a trusted friend. Thus successfully selling to one person on a social network is like selling to many people. A pleased customer may give recommendations on social media websites that serve as free advertising and their networked friends may turn into buyers. These friends tend to lean to user recommendations than company sales messages felling that they are given insights that are not biased towards the companys profit interest. User Multiplier Effect: The more people in ones network, the better. The more you reach out to, increases the amount of people you actually reach in an exponential fashion if you advertise properly creating a buzz within the network. Detailed Demographic Data: Compared to other marketing media offline, such as television, radio and print, advertising decisions are based on demographic knowledge of these broadcast and print companies target audience. Often this demographic data are determined through user surveys of viewers, listeners & readers. In social media sites, demographic data is based on user profiles, which does not require survey participation. Users willingly fill up profiles complete with data down to specific interest, hobbies, sports, occupation, location, age, gender, marital status, and much more information that gives advertisers may be able to use to advertise to a very targeted desired audience thereby increasing sales conversions from social media sites.
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Figure 8: Screenshot of a typical Renren page. On the page has only a few ads. There is some banner ad space below and there was an area not really advertising some ads by a company, but advertising other games and apps that Renren users can use on the social media site.
Renren did not have much advertising appearing on their pages. Although during the research phase of this paper, the pages were viewed without logging in as a registered Renren user. And the only ad space was not even showing a user targeted ad and was simply an ad of Renren itself promoting to sign up for free on the social networking site. Renren currently has more than 160 million users and works with more than 1,000 third party companies that help develop social gaming applications11 that also opens up to new types of advertising mediums that online merchants can take advantage of. The main takeaway when advertising on social media sites in China is to understand the demographic information of the social media site, getting the most out of a marketing budget. It is best to choose the right social media network depending on your target audience. And as
11
Global Sourcing Business Plan for Renren 2011 Changjun Ru URL: http://vimeo.com/22515993
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mentioned earlier, Renren is ideal to target for everyone, Kaixin for working professionals and 51.com for the people in rural areas. Once the right network is chosen, target ads based on user profile demographic information. Lastly for advertising on social games, always consider age and social status taking note of the data found on Figure 4 & 5 and Table 3. Foreign Based Companies Selling to China The foundation of online marketing for foreign countries to the Chinese people is not much different as the online marketing Chinese people do within the country by China based companies. But being a foreign company, there would be some differences in online marketing that may around the language, culture, legal system and nature of the Chinas online market space. Below are guidelines where some differences may exist for foreign countries marketing to China: SEO o
Web Hosting: Hosting websites on a China based server helps out in search engine ranking within China, and also speeds up the loading time of pages to users in China. But hosting in China requires an Internet Content Provider (ICP) license, and to have an ICP license, the website owner should be able to provide a copy of the business license in China, ID card of the contact person who should be a Chinese national, and the China address of the registered company is also required. Foreign passport holders cannot be the Chinese contact on file. Having no company registered in China is not allowed. Foreign countries with no registered business in China are not allowed to have an ICP license either. Hong Kong, Macau and Taiwan are not exempted from this rule and they are considered also as foreign countries. China based companies with websites not hosted in China also cannot apply for an ICP license. o Domain Name: Having a .cn Country Code Top Level Domain (ccTLD) extension also helps out in search engine ranking for sites searched within China. Unlike webhosting, purchasing a .cn domain does not require a China registered business. o Baidu & Bing China: Baidu, being the top search engine in China is the main search engine to target and a native Chinese speaker and reader would always be an asset. A Chinese speaker should assure you have the right content, and would help out in reading and navigating through Baidu properly. There is no need to worry about most international search engines since Google cannot be viewed from China. Although within Baidus search results, Bing China results may appear. Thus it also makes sense to target ranking within Bing China. Social Media o Chinese Speaker: Since all social media sites do not have an English version, it is imperative to have a native speaker of Chinese on your social media team. o Social Games: Look at the potential of creating a game, advertising in a game, or sponsoring
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some game development. Renren has been moving into integrating more games and apps on their website. o No Facebook: Similarly to Google, Facebook is not viewable in China. Ecommerce o Customs Import of Goods Declaration Getting hosting on China for the SEO benefit may be difficult to obtain if the company is not registered in China. But that does not mean products cannot be sold on the ecommerce hubs that rank well in Baidu. One of the requirements would need to secure a China Customs Import of Goods Declaration. For more information about that, you may check: http://english.customs.gov.cn/ o Selling within the Proper Categories With the top Chinese ecommerce sites, some may have strict rules of what products can be sold and should fit within the sites product categories. A product that does not fit any of the categories may not be sold in China. Aside from that, each category may have a separate set of legal requirements, especially those related to health, such as cosmetics and food.
China Based Companies Selling to Foreign Countries For Chinese companies selling to foreign countries, it would be best to partner up with foreign company or setup an office outside of China for sales purposes. Not only would this be ideal for sales communication channels, but also for setting up all necessary online marketing mediums. Since the target audience is outside of China, and the predominant search engine and social media network is Google and Facebook respectively, it makes sense to target marketing on these websites. Having an office and staff that only exist in China would not be able to take advantage of this. Below are some guidelines for China base companies targeting foreign customers: Target mainly Google, but still target Baidu as well: Most people worldwide would be using Google so using Baidu for SEO purposes would have a less priority, although some foreign companies may have an in-house Chinese national that does all the supplier research and may still target Baidu. Thus it still makes some sense to also rank well in Baidu. Target Facebook, but there is no need to target Renren: Most users of Chinese social networks are based in China. Thus it does not make sense to target these networks and focus strictly on Facebook. Use Major B2B Ecommerce Sites in China: Aside from selling products on major international ecommerce hubs such as Amazon and eBay, selling products on major Chinese B2B ecommerce platforms are also ideal. When searching for products and services from China, many of the Chinese B2B ecommerce hubs also rank well in Google. One of the most popular ones are Alibaba which is a popular trading ground for many countries worldwide. And to gain a stronger competitive advantage, might as well use all the major B2B ecommerce sites in China as listed on Table 4 above.
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About the Author and Disclaimer

This study was researched and written by Benj Arriola, SEO Director at Internet Marketing Inc., a full service online marketing agency based in San Diego, California USA. This paper was a written assignment as part of the requirements of the Masters of Business Administration degree at the University of Redlands, California under the Global Information Systems course. The author has decided to also publicly distribute this research for educational purposes on the Internet Marketing Inc. blog and was not intended to be used and taken as business advice. The author, Internet Marketing Inc., University of Redlands or any of the staff and members of these organizations will not be held responsible for any losses due to taking action on the shared information of this paper.
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Current State of Search Engines, Social Media and Ecommerce in China

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IT in China:

Overview of Chinas Internet Users

Land Area Population Population Density

Country China United States

Internet Users 460.1 million 245.2 million

Figure 4: Education Levels of Urban and Rural Internet Users in China

Figure 5: Age Distribution of Urban and Rural Internet Users in China

Annual Increase in Rural Usage

Annual Increase in Urban Usage

Search Engines, Social Media or ecommerce usage

Information Entertainment Communication Communication Entertainment Communication Entertainment

News Music Email Instant Messaging Video SNS

82.80% 83.80% 61.00% 71.90% 64.50% 14.20% 42.70%

72.40% 82.70% 44.60% 68.20% 57.30% 12.10% 41.20%

-10.30% -1% -16.40% -3.70% -7.20% -2.10% -1.60%

33.20% 29.20% 25.10% 21.30% 19.90%

30.60% 28.40% 28.70% 21.20% 18.60%

(Translated: Happy Network) www.kaixin001.com

Figure 6: Top 10 Chinese B2C ecommerce Sites by Visits Stickyness9

There is no personalized results.

Has only 1 ad displayed.

About the Author and Disclaimer

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