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BIZCHINA> Top Biz News
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Google, Baidu eye new mobile market
(China Daily/Agencies)
Updated: 2009-10-19 08:52
As China ushers in a new generation of snazzy smartphones and 3G networks, Google and Baidu are shifting their battle from the Internet to China's mobile search market. The country's mobile search market is likely to become the world's largest, with the potential promise of billions of dollars in revenue. However, experts said that putting a price tag on the potentially massive market is tough. Any future riches could be years off due to a lack of clear business models and potential competition, as well as the political risk in China's tightly controlled media markets, the experts said. "Everything is growing very fast, but who is going to make money?" asked Wallace Cheung, an analyst with Credit Suisse. "The (mobile search) market is so diverse, even globally there is no sure business model yet," Cheung said. Google, a distant second to Baidu in China's 1.8 billion yuan ($263.66 million) PC search market, is the world leader in mobile search by revenue and determined not to cede control of mobile search in the Chinese market. Google said recently it expects mobile search revenues to surpass PC search revenues in a few years. China's mobile search market, where Google and Baidu are currently tied with a market share of about 26 percent each, is potentially huge due to China's more than 700 million mobile subscribers. That's about double its 338 million Internet users. Billions of dollars in revenue could be at stake if the market develops along lines similar to PC Internet search. According to government data, at the end of June this year China had 155 million mobile Internet users, and more than 40 million of them used mobile search. China's mobile Internet market numbers far surpass those of the United States, where there were only about 40 million mobile Internet surfers at the start of the year, according to a JP Morgan report. "For the mobile search market, the number is still small but the growth potential is extremely high," Baidu Chief Technology Officer Li Yinan told Reuters in a recent interview. "It is an important area." China's mobile advertising industry was worth 754 million yuan last year and is set to nearly double by 2010. Mobile search volume rose 120 percent in the second quarter alone to 272 million clicks, according to Analysys International. Some analysts said the mobile platform could actually be easier to monetize, too, since mobile carriers can also double as bill collectors. This function has helped texting services run by companies such as Sina and Sohu.com to reap profits. "We expect China's mobile value-added services industry to have another two to three years of rapid growth with a compound annual growth rate of 22 percent from 2009 to 2012," Alan Hellawell, a Deutsche Bank analyst, said in a recent report. "The deployment of 3G networks will enable a far broader and deeper market for mobile applications," he said. Mobile competition Google and Baidu have been aggressively courting mobile users this year. Google, which recently introduced new mobile services in China, launched an advertising campaign in Shanghai, Beijing and Guangzhou to market its mobile services. Baidu, which holds 61 percent of the desktop search market, said in early September it planned to hire two software engineers to focus specifically on the mobile platform.
Analysts said Baidu still has the edge in China's mobile market given its brand, depth of local information and its dominant position in the desktop search market. The rollout of 3G will lead to faster downloads and offer users more sophisticated functions such as global positioning search, mobile reading and music search. "The market is still young, so it is hard to say. But with 3G, a lot more people will use mobile search because the data speed allows them to get on the Internet," said Dick Wei, an analyst with JPMorgan. If the market really takes off, Baidu and Google could also face the potential for competition from other companies such as Tencent Holdings. The operator of China's largest instant messaging platform has been experimenting with its own search algorithms, industry sources said. "It's going to take some time for them to figure out what is the right business model to generate revenue on the mobile platform," said Elinor Leung, a CLSA analyst. (For more biz stories, please visit Industries)
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