3Q2007 China Paid Search Advertisers Survey Results Released

【Beijing, December 18, 2007】China IntelliConsulting Corporation (CIC) has published its paid search advertisers survey report for the third quarter of 2007. The report shows Baidu has a market share of 62.0% in China paid search market, while Google takes a 22.7% and Yahoo 10.8%.
Starting from the beginning of 2007, China IntelliConsulting has completed four quarterly surveys on the advertisers’ side and two semi-annual surveys on the users’ side of China search engine market. According to CIC’s search engine user survey of September 2007, Baidu managed to boost its user market share up to 70%. Benefiting from its huge user traffic, Baidu has grown its paid search Customer base by more than 30% and ARPU by 40% in the first nine months of 2007.

Regional Dissemination

CIC found, through its quarterly paid search advertisers surveys, that small- and mid-sized businesses (SMBs) of China Central and Western regions like Hebei and Sichuan as well as SMBs in second-tier cities and rural areas of coastal provinces like Jiangsu and Shandong, started to adopt paid search advertisement in herds. The combined number of advertisers from four cities of Beijing, Shanghai, Guangzhou and Shenzhen in 3Q07 accounted for 47.4% of total national advertisers, brought down from as high as 57.7% at the end of 2006.
SMBs from different regions/provinces can be translated as a huge reservoir for Baidu/Google’s new Customer bases for years, as long as China’s economy does not slow down.
Geographically, Baidu boasts larger market shares in Beijing and almost all Central and Western provinces than its national market share, while Google performs relatively better in Shanghai, Zhejiang, Fujian and Guangdong provinces than its national average.

Google Benefits from Baidu’s Hype Growth

Baidu has a greater lead over Google in user market share as well as brand awareness in regions/provinces other than Beijing, Shanghai, Guangzhou and Shenzhen, and Baidu has a more effective nationwide distribution network than Google does. As such, Baidu takes in a lion’s share of new advertisers in number (81.2% of new advertisers placed ads on Baidu vs. 29.6% on Google).
But Google has benefited from the rapid growth of Baidu’s Customer base as experienced advertisers tend to adopt cross-platform marketing strategies. In the 4th quarter, Baidu customers adding Google into their advertisement portfolio will constitute 49.9% of Google’s new acquired customers (Table 2), contribute 9.6% to Google’s QoQ increase in its Customer base, and result in Google’s QoQ growth rate in Customer base exceeding Baidu’s for the first time (Table 3).
Table 2 also implies that Google will acquire more customers from earlier Baidu customers than from new advertisers.

Low Awareness of Invalid Click Issues

About one half of total advertisers are not aware of invalid click issues (Table 4).

Average invalid click rates estimated by advertisers with at least some knowledge about invalid clicks:

Invalid click rate on Baidu was estimated to be 42.8%, more than 12 percentage points higher than those on Google and Yahoo. 39.3% of Baidu advertisers who have at least some knowledge about invalid clicks say invalid click rate is too high and discouraging (Table 6):

But this is not the whole picture. Among Baidu advertisers, just 27.9% have some knowledge about invalid clicks and can tell what the invalid click rate is on Baidu. The majority of Baidu advertisers are either not aware of the issue or they just can not tell what the rate is (Table 6). With this in picture, Baidu may have plenty of time to win and keep advertisers with its huge user market share before the invalid click issues come to haunt Baidu.

CIC China Paid Search Advertisers Survey Report 3Q2007 is based on survey results conducted in early October. The survey extracted 55,180 active paid search advertisers from Baidu/Google/Yahoo ad systems to form a sampling pool. 1,619 respondents randomly selected from the sampling pool successfully completed our telephone interviews.

A brief presentation file is available here.

For further inquiry on the survey methodology, survey results and the final survey report, please contact:

Peter Bowang Lu
Managing Partner and Chief Analyst

China IntelliConsulting Corporation
Tel: +86-10-8256-2129