current state of search engines, social media and ecommerce in china

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IT in China:Current State of Search Engines,

Social Media and Ecommerce in Chinaas an Online Marketing Medium

By: Benj Arriola

Assignment 4 April 11, 2012MBA ISYS368

University of RedlandsGlobal Information Systems

Prof. Mark Gruber


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Page2/11/2012IT 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/

IT in China: Current State of Search Engines, Social Mediaand Ecommerce in China as an Online Marketing Medium

The Peoples Republic of China is one of the fast developing nations whose economic growthhad been catching up with the rest of the world in the past decade. To understand the currentstate of search engines, social media websites and ecommerce in China, it has to be placed inthe proper perspective, starting with an overview of Chinas Internet users, and then lookinginto 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 donewithin China there are three poignant factors that are to be taken into account. These are asfollows:

a) marketing within China by Chinese companies to the Chinese consumersb) 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 themore 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 alarge difference in population.

China United States

Land Area 3.601 million sq. miles(world rank: 2

nd)

3.537 million sq. miles(world rank: 3

rd)

Population 1.35 billion people(world rank: 1st)

309 million people(world rank: 3rd)

Population Density 376 people/mi2

(world rank: 80th)

87.3 people/mi2

(world rank: 187th)

Table 1: Large difference in population density between the US and China. A larger population may be correlated toa larger online market. Data from The World Bank, World Development Indicators as of 2010.


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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 thiscountry is highly inconsistent with the whole population and total land area. There are someplaces in China that are very developed with high-rise building but they also have a vast ruralfarm lands. And typically, rural areas may not have a computer or a personal Internetconnection.

To verify the correlation of population and amount of Internet users, based on compiledstatistics as of 2010 by Wolfram|Alpha

1, online internet users in China is almost double the

users of the United States!

Country Internet UsersRelative Values

Ratios Comparisons

China 460.1 million 1.876 1 87.63% larger

United States 245.2 million 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 KnowledgeBase 2012.

Figure 2: Growth of Internet users in China and the United States. Starting 2007, Chinas Internet user populationstarted 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 inChina, are from the rural areas.

1Wolfram|Alpha Knowledge Base 2012 & Wolfram Mathematica Country Data URL:

http://www.wolframalpha.com/input/?i=china+vs+US+internet+users
http://www.wolframalpha.com/input/?i=china+vs+US+internet+usershttp://www.wolframalpha.com/input/?i=china+vs+US+internet+users


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

Business Stock Trading 16.90% 8.50% -8.40% 153.70% 54.80% ecommerce

Business Banking 27.70% 15.20% -12.50% 103.20% 55.10% ecommerce

Business Online Payment 27.70% 15.10% -12.60% 101.70% 72.30% ecommerce

Business Travel Booking 9.40% 3.30% -6.10% 60.20% 80.20% ecommerce

Communication Forums 32.90% 23.30% -9.60% 48.00% 21.90% Social Media

Entertainment Gaming 68.60% 69.90% 1.30% 47.50% 39.40% Social Media

Communication Blogging 58.40% 55.50% -2.90% 45.10% 33.80% Social Media

Business Shopping 31.70% 17.60% -14.10% 44.70% 44.60% ecommerce

Information Gathering Search Engines 75.90% 66.50% -9.40% 43.30% 37.50%Search

Engines

Information News 82.80% 72.40% -10.30% 33.20% 30.60%

Social Media

& Search

Engines

Entertainment Music 83.80% 82.70% -1% 29.20% 28.40% Social Media

Communication Email 61.00% 44.60% -16.40% 25.10% 28.70% Social Media

Communication Instant Messaging 71.90% 68.20% -3.70% 21.30% 21.20% Social Media

Entertainment Video 64.50% 57.30% -7.20% 19.90% 18.60% Social Media

Communication SNS 14.20% 12.10% -2.10% Social Media

Entertainment 42.70% 41.20% -1.60% Social Media

Table 3: Internet usage percent penetration of total population in China based on the study by CNNIC and publishedby Nanjing Marketing Group.4 The added green column shows where each purpose can be tied specifically to theusage of search engines, social media sites and ecommerce sites.

4China'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-rural-chinese-internet-users-2010
http://www.east-west-connect.com/urban-vs-rural-chinese-internet-users-2010http://www.east-west-connect.com/urban-vs-rural-chinese-internet-users-2010http://www.east-west-connect.com/urban-vs-rural-chinese-internet-users-2010http://www.east-west-connect.com/urban-vs-rural-chinese-internet-users-2010http://www.east-west-connect.com/urban-vs-rural-chinese-internet-users-2010


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Chinas Major Search Engines, Social Media Sites and Ecommerce Sites

Chinas Search EnginesChina 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 gainsome attention outside of China is Baidu. For a very long time, comScore has been monitoringmarket share of the different worldwide search engines and Baidu has always ranked 3

rd

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 secondlargest search engine based on search engine usage.

5Back in 2009, Nanjing Marketing group

conducted a research on the search engine market share between Chinese search enginesalone

6, Baidu emerges as the top search engine at 77.2%, and a very far second is Google at

12.7%. 3rd, 4

thand 5

thare 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 themarket share of Baidu in China. Baidu has also expanded outside of China, and runs BaiduJapan, but this has not made a strong impact yet on the Japanese Internet community. Andbased on recent reports, smartphone mobile users in China now have Baidu as the defaultsearch 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 USleading 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 socialmedia 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, whichmeans 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

5Global 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_Searches_per_Month6China Search Engine User Behavior Research Report 2009 - Summary 2009 Nanjing Marketing Group, URL:

http://www.nanjingmarketinggroup.com/knowledge/china-search-engine-report-20097Baidu 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-out-google-search-and-services/
http://www.baidu.com/http://www.baidu.com/http://www.baidu.com/http://www.cctv.com/http://www.cctv.com/http://www.cctv.com/http://www.panguso.com/http://www.panguso.com/http://www.panguso.com/http://www.sogou.com/http://www.sogou.com/http://www.sogou.com/http://www.zhongsou.com/http://www.zhongsou.com/http://www.zhongsou.com/http://www.renren.com/http://www.renren.com/http://www.renren.com/http://www.kaixin001.com/http://www.kaixin001.com/http://www.kaixin001.com/http://www.51.com/http://www.51.com/http://www.51.com/http://www.comscore.com/Press_Events/Press_Releases/2009/8/Global_Search_Market_Draws_More_than_100_Billion_Searches_per_Monthhttp://www.comscore.com/Press_Events/Press_Releases/2009/8/Global_Search_Market_Draws_More_than_100_Billion_Searches_per_Monthhttp://www.nanjingmarketinggroup.com/knowledge/china-search-engine-report-2009http://9to5google.com/2011/09/05/baidu-launches-its-own-android-based-mobile-os-in-china-leaves-out-google-search-and-services/http://9to5google.com/2011/09/05/baidu-launches-its-own-android-based-mobile-os-in-china-leaves-out-google-search-and-services/http://9to5google.com/2011/09/05/baidu-launches-its-own-android-based-mobile-os-in-china-leaves-out-google-search-and-services/http://9to5google.com/2011/09/05/baidu-launches-its-own-android-based-mobile-os-in-china-leaves-out-google-search-and-services/http://www.nanjingmarketinggroup.com/knowledge/china-search-engine-report-2009http://www.comscore.com/Press_Events/Press_Releases/2009/8/Global_Search_Market_Draws_More_than_100_Billion_Searches_per_Monthhttp://www.comscore.com/Press_Events/Press_Releases/2009/8/Global_Search_Market_Draws_More_than_100_Billion_Searches_per_Monthhttp://www.51.com/http://www.kaixin001.com/http://www.renren.com/http://www.zhongsou.com/http://www.sogou.com/http://www.panguso.com/http://www.cctv.com/http://www.baidu.com/


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Renren in August 2009, the site has evolved and changed in appearance, but still has a strongresemblance to Facebook.

With Renren as the overall social media leader in China, Kaixins main user base are mostlythe wealthy users and large corporate users. Contrasting to Kaixin, is 51.com whose users aremostly from the rural areas of China.

8

Similar to Google in China, Facebook is also blocked in China, so Facebook is not evenconsidered as a competitor of these 3 major social networking sites in the said country.

Chinas Ecommerce SitesIn 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 thatcannot afford their own infrastructure or want to ride on the popularity of ecommerce hubsonline, 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 ecommercewebsite leaders. Similarly in China, there are also many ecommerce sites. The main 3 leadersare 360buy.com, M18.com and Amazons Joyo. Unlike in the search engine and social mediaindustry where the US respective giants, Google and Facebook are not present in China, forAmazon, they have a separate store specifically for China called Joyo that uses the domainname 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, othercountries would interact with China through these B2B ecommerce sites. In a research byChina B2B Research Center shows that the number of B2B ecommerce sites have increased

8China's Top 3 Social Network Sites 2010 Richard McManus, ReadWriteWeb URL:

http://www.readwriteweb.com/archives/china_top_3_social_network_sites.php9

Top 10 Chinese E-Commerce Sites by Stickiness, Customer Loyalty 2011 Steven Millward, TechInAsia URL:

http://www.techinasia.com/china-top-ten-ecommerce-sites/
http://www.readwriteweb.com/archives/china_top_3_social_network_sites.phphttp://www.techinasia.com/china-top-ten-ecommerce-sites/http://www.techinasia.com/china-top-ten-ecommerce-sites/http://www.readwriteweb.com/archives/china_top_3_social_network_sites.php


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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 caseto case basis. 3 distinct situations that vary these strategies would be:

a) China marketing to Chinab) Foreign countries marketing to Chinac) 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 existingadvertising 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 theposition 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 thenumber 1 ranking site. In numerous studies, it has been fairly consistent where organiclistings are clicked from either 3 to 5 times more than sponsored PPC listings. Although PPClistings give the advertisers a stronger level of control and ability to instantly gain rankingresults with measurable ROI. It would be improper to compare SEO and PPC and say onewould be better than the other; both have their own strengths and weaknesses and this wouldnot be properly comparing apples to apples.

Figure 7: Simple comparison of search results from Google and Baidu. In this example, a consumer product wasused 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 bothGoogle and Baidu. Table 5 below show the main differences that affect the selling of productsonline.

Feature Google Baidu Marketing Benefit

DictionaryResults

Does notdisplay thedefinition.

Displays thedefinition.

Definitions help users learn definitions of keywords.Although Google also has this feature, Google onlydisplays this if the intention seems to request thedefinition. The laptop computer keyword is a commonword and seems to have more of a buying intent.Google has the sophistication to determine what wordshave a buying intent and definition intent and adjustresults accordingly. Thus prioritizing shopping heavyresults, thus help increasing sales of the product from

shopping sites.

PersonalizedResults

Highlightsresults fromcommonfriend

recommendations found onGoogle+

There is nopersonalizedresults.

Although users tend to think personalize results whichare 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 socialnetwork Social+ serve as personal recommendation

results from real friends. And recommendations fromfriends are usually trusted and non-biased excluding all

unnecessary sales talk. Again Google helping out inmaking sure people do click on these search results,and possibly increasing sales.

PPC Ads Has a fullyoccupied adspace.

Has only 1 addisplayed.

Laptop computers are a very common user appliance,the amount of ads on Google shows how competitivethe online market is. The fact that many companies areadvertising proves that this medium is an effect way of

selling online. Baidu with only 1 ad shows the weakconfidence of the merchants to pay Baidu and get asponsored listing.

ShoppingResults

Displaysshopping

resultsleading topopularecommercesites.

Has noshopping

results, butthe organiclisting includesomeecommercesites.

Although Baidu does display ecommerce sites in itsorganic results, it is treated like any other webpage.The totally separate shopping results of Google maydisplay thumbnail images, pricing information, reviews

and ratings, related products and related brands. All ofthese help in the buying decision of a customer and

increases sales of these products.

Bing Results Does notexist.

Baiduallocates aportion of thescreen real

estate to BingChina results.

Microsoft has some partnership with Baidu where thereare some Bing china results that appear on Baidu. Theproblem is the results do not seem to make it morerelevant. And the results are not strongly geotargeted.

Most of the results did not even include China-basedcompanies. They were US based results like WikipediaUS, 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 searchengine results page (SERP) to help improve user experience, user retention and merchantattraction. 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 userexperience may be inferior to Google. Google is not viewable in China thus Baidu would still bethe best performing search engine that China. China based merchants can maximize its usagefor the best profitability from search engine traffic.


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Social Media PPC and Community Audience Development With the growing success ofRenren and other social media sites in China, the large user base and user engagement wouldgreatly benefit merchants. Although comparing this to search engine benefits, the success ofsocial media marketing would be based on proper ad targeting based on demographic data. InSEO and search engine PPC, your strategy revolves around keywords, targeting words thatpeople are searching for. The main fact that users are searching for a product or serviceincreases the likelihood of the users to buy a companys product or service because of thesimple fact they are searching for it. In social media, the users are not necessarily in search ofa product or service, thus users are not really in a buying mode which can be a disadvantagecompared 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 usersurveys 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 spacebelow 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 researchphase 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 ofRenren 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 partycompanies that help develop social gaming applications11 that also opens up to new types ofadvertising mediums that online merchants can take advantage of.

The main takeaway when advertising on social media sites in China is to understand thedemographic 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

11Global Sourcing Business Plan for Renren 2011 Changjun Ru URL: http://vimeo.com/22515993
http://vimeo.com/22515993http://vimeo.com/22515993


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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.

Ecommerceo 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 CategoriesWith 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 foreigncompany or setup an office outside of China for sales purposes. Not only would this be idealfor 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 engineand 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 beable to take advantage of this. Below are some guidelines for China base companies targetingforeign 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.
http://english.customs.gov.cn/http://english.customs.gov.cn/http://english.customs.gov.cn/http://english.customs.gov.cn/


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