Baidu (Nasdaq: BIDU)’s share prices has been steadily growing over the last one year, but how will this system switch affect Baidu (Nasdaq: BIDU)’s share prices?

1. Baidu’s stock price will go up
2. Baidu’s stock price will go down
3. Baidu’s stock price will have no change
4. I don’t know what will happen

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Check out Baidu, Inc. (Nasdaq: BIDU)’s company profile.

• Google Sites: 39.1%
• Yahoo Sites: 24.0%
• Baidu.com: 16.7%
• NHN Corporation (owns Naver.com): 5.3%
• Alibaba.com Corporation: 2.2%
• Microsoft Sites: 1.8%
• Lycos Sites: 1.7%
• Tencent: 1.4%
• Friendster.com: 1.2%
• Sohu.com: 0.8%

Four out of 10 search engines above are local Chinese search engines: Baidu.com, Alibaba.com, Tencent, and Sohu.com. However in reality, besides Baidu the other 3 host Internet search functionality and are not strictly search engines.

Baidu.com and Alibaba – 2 Chinese search engines ranked in the top 10 in terms of the world’s search market share in December 2007. To get exposure from Chinese search engines, setting up SEM strategies that include Baidu PPC is essential.

Another research report from comScore.com shows that in April 2008 China’s Internet users topped the total number of unique searchers in the Asia-Pacific region. China’s search engine users also performed a total of 6.23 billion searches in the same month.

• China: 82.8 million
• Japan: 60.1 million
• India: 21.8 million
• Korea: 20.7 million
• Taiwan: 9.88 million
• Australia: 8.71 million
• Malaysia: 7.08 million
• Hong Kong: 2.91 million
• Singapore: 1.69 million
• New Zealand: 1.64 million

China’s Internet population rose to 210 million by the end of 2007 from the previous year’s 137 million, which is a 16% increase, according to a survey conducted by China Internet Network Information Center (CINIC). Among all the users, 72.4% had used search engines.

Among the entire Chinese Internet population, users aged from 18 to 24 made up 31.8% of the total, users aged from 25 to 30 accounted for 18.1%, and those aged from 31 to 35 accounted for 12%. Students made up 28.8% of China’s total Internet users.

Chinese Internet users who earn at least 5,000 yuan per month accounted for 5.2% of the total, and those earn between 1,000 and 2,000 yuan made up 28.7% of the total.

Baike (baike.baidu.com)

Baike is the equivalent version of Wikipedia in China (but in simplified Chinese). On Baike, you will find articles on topics from historical people to modern science, and from old cultures to Internet technologies.

Zhidao (zhidao.baidu.com)

Zhidao is the equivalent version of Yahoo! Answers in China (Chinese). On Baidu Zhidao, you will see questions and answers on topics from computer hardware to electronic gadgets, and from lifestyles to health.

Post (post.baidu.com)

Bulletin Board System (BBS) had a long history in China and it has been a very popular platform for social networking in China. Baidu recently started out on this popular platform. All sorts of discussions can be found on Baidu Post which include posts of popstars, sports and computer games.

News Search (news.baidu.com)

Baidu News Search is certainly one of the search verticals Baidu has been leading in China. Old media (traditional newspapers) is still alive, but the new media (news on the World Wide World) is emerging rapidly.

MP3 Search (mp3.baidu.com)

Baidu MP3 Search is a big hit in which you cannot ignore. Even some previous researches supported that a large portion of Baidu search traffic has been generating from MP3 Search. You may argue that Baidu MP3 Search does from time to time run into troubles with legal (copyright) issues, the music file search service is unarguably a free and very convenient way for Chinese users (especially the younger generation) to keep in touch with the latest music.

Sogou’s news search took over Netease (163.com) in late Q2 to become second.

Google China also had a significant increase in Q2, despite the decrease of search market share of its English site. The increase may have to do with Google’s localization strategy in China, in which different versions of Google China News have been launched.

Baidu.com

• January: 69.5%
• February: 73.5%
• March: 73.6%
• April: 70.3%
• May: 71.4%
• June: 69.3%

Sogou.com

• January: 9.0%
• February: 9.5%
• March: 9.0%
• April: 9.2%
• May: 10.1%
• June: 16.4%

Google.cn

• January: 4.5%
• February: 4.6%
• March: 8.6%
• April: 13.2%
• May: 13.7%
• June: 13.3%

163.com

• January: 15.1%
• February: 11.7%
• March: 13.8%
• April: 11.7%
• May: 11.8%
• June: 11.7%

Google.com

• January: 10.5%
• February: 8.0%
• March: 6.4%
• April: 4.9%
• May: 4.4%
• June: 4.0%

Yahoo.cn / cn.Yahoo.com

• January: 1.9%
• February: 1.7%
• March: 1.5%
• April: 1.9%
• May: 1.5%
• June: 2.1%

IAsk.Sina.com.cn

• January: 1.4%
• February: 1.4%
• March: 1.0%
• April: 0.9%
• May: 0.7%
• June: 1.1%

Zhongsou.com

• January: 1.0%
• February: 1.2%
• March: 1.0%
• April: 0.9%
• May: 0.6%
• June: 0.7%

• Web Search
• News Search
• Image Search
• Music Search
• Map Search

Search Market Share on Web Search

• Baidu: 66.3%
• Google: 18.1%
• Yahoo!: 6.0%
• Tencent: 4.3%
• Sogou: 1.8%
• Other: 3.4%

Search Market Share on News Search

• Baidu: 71.2%
• Google: 10.9%
• Netease: 7.3%
• Sogou: 6.8%
• Yahoo!: 2.3%
• Other: 1.5%

Search Market Share on Image Search

• Baidu: 69.3%
• Google: 6.3%
• Yahoo!: 12.0%
• Tencent: 8.5%
• Sogou: 1.7%
• Other: 2.3%

Search Market Share on Music Search

• Baidu: 79.6%
• Yahoo!: 6.9%
• Sogou: 2.4%
• Tencent: 1.7%
• Sina: 0.6%
• Other: 8.8%

Search Market Share on Map Search

• Baidu: 26.3%
• Sogou: 14.3%
• 51Ditu: 10.4%
• Mapbar: 9.9%
• eDushi: 9.6%
• DDMap: 7.2%
• Other: 22.3%

Baidu may be making itself a Chinese word and may be following the trend of Google (For example, Let’s Google it!). Baidu has been making huge profit growth in China (Baidu Double 2007 Q1 Revenues) and has been the search engine leader in China (Baidu Gaining 2006 China Search Market Share)

• Baidu’s total revenue increased to 275.6 million yuan, representing a year-on-year increase of 103.3%.
• Baidu generated 85,5 million yuan in net income, which is a 142.6% year-on-year increase.
• Baidu had over 112,000 active advertising customers in the first quarter of 2007, which is a 3.7% increase from Q4 of 2006. Revenue per advertising customer was about 2,500 yuan.
• Baidu’s expenses in the first quarter mainly went to human resources and management, traffic acquisition, web hosting and bandwidth, research, and expansion to Japan.
• Baidu is expected to generate at least 378 million yuan in total revenue in Q2.

For those who need to be reminded how the real Baidu looks like, this is the home page,

On top of that, I ran a few search queries on 200so.com and its search results are identical to Baidu’s search results. Also on 200so.com’s homepage there is a link that says ‘About Baidu’, but when you click on it, it redirects back to this 200so.com home page instead of the real Baidu.

For those who do not know, Baidu means ‘Hundred-degrees’ in Chinese. 200so.com’s Chinese name in pinyin coincidentally just happens to be Bai-du as well, though in Chinese characters it actually means ‘White-degrees’.

It is suspected the changes are to make Baidu a more sociable portal, besides simply a search engine. This is exactly where the Chinese online population culture and Baidu are moving towards. Find out more on this topic from my previous post Baidu Moving Towards Social Search. However, comparing to other Chinese search engines’ home pages which are stuffed with flashy and moving ads, Baidu’s approach is still to focus on simplicity and better usability.

Since the launch of Baidu.com in 2001, there have always been accusations that Baidu’s homepage is a copy of Google’s idea. Read more on the 10 facts about Baidu.

Baidu CEO Robin Li recently explained, “In the next couple of years, social search in China will become very predominant. Search engines in China at the very moment is at the 3rd generation – paid search. And this is where Baidu is currently positioned and mastered.”

Earlier this year, Baidu has already shown active signs of digging into the social search area by launching some social verticals like Baidu Post and Baidu Baike.

I reckon the following are the 4 generations of Internet search in China:

• The Keyword Count Generation: This is the pre-Google stage, though in China it barely had existed. However in the US, those search engines in the early years were very user-unfriendly in terms of search results. All they did to rank search results was to count the number of keywords (or keyword phrases) entirely based on on-page factors.
• The Link Popularity Generation: This is when Google and PageRank were born.
• The Paid Search / Sponsored Search Generation: PPC advertising programs like Overture, Findwhat, Google Adwords, and Baidu Jingjia emerged to become monetizing channel of the search engines.
• The Social Search Generation

So where does Local Search fit in? Maybe there is no place for it in China.

• Baidu was established in 1999 by Robin Li who previously worked for Infoseek, an Internet search engine in the early years, as an engineer.
• Baidu’s name is taken from a Song Dynasty poem written a couple of centuries ago that was used to compare the search for a retreating beauty amid chaotic glamour with the search for one’s dream while confronted by life’s many obstacles.
• Baidu started out offering search services to other Chinese portals before developing its own stand alone search engine.
• When Baidu.com, Baidu’s own search engine site, launched in September 2001, many people believed its homepage was a copycat of Google in Chinese, due to its simplicity as well.
• Before Google launched Adwords, Baidu has already launched its PPC advertising model.
• Baidu as a company only started to make financial profits in 2004, mainly based on its PPC advertising model.
• Baidu went public on 5 Aug 2005 at $27 a share on Nasdaq and closed at $122, which was a 354% jump.
• Baidu faces legal challenges including lawsuits claiming it violates copyright laws on music files, due to its very popular MP3 search.
• Today, Baidu has a market value of about $3 billion dollar.
• At the time of posting, Baidu ranks number 4 in terms of traffic according to Alexa rankings, and is the most visited website in China.

• Baidu: 62.1%
• Google: 25.3%
• Yahoo!: 4.8%
• Sogou (Sohu): 3.2%
• iAsk (Sina): 1.2%
• Other: 3.4%

The research report is based on the survey conducted to 4500 people in metropolitan areas of Beijing, Shanghai and Shenzhen. Other interesting findings in the report include:

• Baidu has the highest brand recognition among the search engines in China with 86.5%, compared to 64% for Google, 38.5% for Yahoo!, 36% for Sogou (Sohu), and 15% for iAsk (Sina).
• Only 16.3% users are aware of Google’s English name, while 31.9% recognize its Chinese name “Guge”. Almost 80% users do not like Google’s Chinese name. One of the reasons for choosing Baidu as their preferred search engine over Google is that users have no problem spelling “Baidu”.
• Google is the first option of non-student users with monthly income of over 3,000 yuan. Basically most Beijing users (mostly students) continue to stick with Baidu, while more Shanghai users (mostly non-students) favor Google. However, it is believed Baidu has started to capture Google’s non-student core users and has shaken Google’s position in the high-end user market.
• 76.3% users make use of more than one search engine.
• 49.3% users reckon the most important reason for them to use a search engine is the relevancy of its search results. The second and third reasons are personal habit and speed respectively.
• 72.8% users only use the main web search on their first choice search engines, let alone other vertical search functions. Breaking down into search engines it is 80.8% for Sogou, 77.8% for Google, 70.5% for Baidu, and 60.5% for Yahoo!.
• Bulletin boards provided by Baidu and free email services provided by Sina (iAsk), Sohu (Sogou) and Yahoo! are also reasons that users are being drawn to these search engines.

“We have made some informal communications with officials at the China Securities Regulatory Commission for a possible domestic listing. However, we are still facing many legal obstacles if we want to list domestically as there hasn’t been any specific regulations which allow the likes of Baidu to list domestically.”

If Baidu can list domestically in China, it can advance its status in acquiring other search engine related companies that can complement Baidu’s core business.

• Baidu: 189 million yuan
• Google: 61 million yuan
• Yahoo: 59 million yuan
• Sohu: 28 million yuan
• Sina: 10 million yuan
• Zhongsou: 10 million yuan
• Netease: 5 million yuan
• Other: 14 million yuan

Both Baidu Index and Google Trends provide search trends on Baidu search and Google search respectively.

One shortcoming of Baidu Index over Google Trends is that it does not break down its data by cities, countries and regions, and language. However, the data of Baidu Index is more updated, while Google Trends displays data that was over a month ago.

Baidu is the most popular search engine in China, so Baidu Index is a great tool in helping marketers to better understand Chinese Internet users.