Baidu’s recent trouble opens great opportunity for Bing in China


Baidu is involved in a series of public relations crisis, which opens a great opportunity for Bing to explore the China market.

Winston Sun, MBA '16

by Winston Sun, MBA ’16, EMI Fellow

Launched in 2009, Bing is still at the corner of the stage. As of April 2016, Bing only accounts for 12.37% of the global search market. Currently, Chinese search engine giant Baidu is involved in a series of public relations crisis, which opens a great opportunity for Bing to explore the China market. In order to penetrate the market, Bing needs to make some necessary adjustments to product design: exclude medical advertising, index more international websites in China, and increase the weight of landing page quality in ranking. Finally, Microsoft should focus its marketing in tier 1 and tier 2 cities, as well as set Bing as the default search engine for Win 10.

A series of public relation crisis damaged Baidu’s credibility

Baidu is under public scrutiny since 2008, focusing on its business ethics. The reports have negative impacts on Baidu’s stock price and revealed investors’ worry over the sustainability of Baidu’s profit. Especially the recent Death of Zexi Wei, assumedly because of fraudulent medicine advertisements on Baidu, caused the stock price to plunge more than 10% till now. The stock price declined from $194.30 before the crisis to 173.94 May 6th.

Source: Yahoo Finance

The business model of the search engine is based on trust: users will only use the search engine if they believe it will yield the proper results. The continued and increasing doubts of users towards the credibility of Baidu will reduce both the market share and click through rate. The decline will be reflected in the price of ranking auction and sponsored ads.

The market is lack of a viable alternative

Baidu commands the China search engine market because of lack of better alternative. Google, the dominant force in global market, can hardly be accessed in mainland China. There are other smaller players, such as Soso, Sogou, Qihoo 360, etc., but either their parent companies are also being criticized on business ethics or lack sound technology to return the most relevant search results. Hence Baidu’s lack of any serious challenge in the market.

Source: Analysys

Due to political reasons, Google may not return to the China market in the near future. Backed by Microsoft, Bing is the only player with deep enough pockets and technological superior to challenge Baidu’s dominance.

According to Analysys, in Q4 2015, China search engine market reached RMB 21.7B ($3.34B), in which 80.3% went to Baidu. If Bing can reach its global market share level in the China market, it can earn over $1.5 B additional revenue. Considering the market is expected to grow over 40% YoY, the figure will be even more attractive over time.

The uniqueness of the China search engine market requires Bing to make some adjustments.

Forbid any medical advertisement

According to Baidu’s annual report, the top five industries contributed around 50% of the search engine revenue. Medical industry is the biggest contributor. Various sources estimate it accounts for 15% – 20% of Baidu’s revenue.

The sector is highly lucrative but is dangerous. China lacks the same solid regulation enjoyed by consumers in the developed world towards medical advertisements. The highly professional health care information providers, such as Mayo and WebMD, are nonexistent either. Under such circumstance, the search engine usually has great difficulty to distinguish the fraudulent medicine and health care services from the real ones.

What’s worse, reliable health care providers in China seldom run advertisement campaigns. Most of the reliable health care providers in China are owned by the government. They have relatively less incentive to advertise because they are already overwhelmed by a huge number of patients. Also, the promotion of management and doctors are not based on revenue, but by the political and academic system. They simply do not have the incentive to advertise.

The factors result in a very high portion of fraudulent medicine in the overall medical ad markets. Since 2008, nearly all the public relationship crisis of Baidu associates with medical ads. Soon after the recent scandal, another search engine provider announced that it would delete all medical ads. By forbidding any medical ads, Bing can use this opportunity to address its care about consumer interest, and establish brand asset.

Bing can also translate some trusted source of health care information, such as Mayo and WebMD, into Chinese, and display them on top of the results. The movement, although need extra efforts, can foster consumers’ trust. As discussed before, the search engine is a trust business. Trust can bring more traffic and higher click-through-rate, which can be transferred into revenue.

Crawl more international websites

After Google withdrew from China, Chinese users are largely cut off from foreign internet resources. Baidu and other domestic service providers only index very limited foreign language resources. Considering that over 90% of internet information is in English, Chinese users suffer huge efficiency loss because of the information divide.

Many government offices, companies and individuals use VPN to access Google. Global Web Index reports 93 million Chinese users visit social media via VPN. The number may be seriously exaggerated, but it still shows the huge demand of Chinese users to access foreign websites.

Google (via VPN) performs better on Chinese search query than several years ago. But as it does not have full access to online behavior of Chinese internet users, the ranking still can be improved.

Bing can be a bridge between Chinese users and broader internet resource. Moreover, the users want to access international internet usually have higher income, and are more valuable for advertisers.

User landing page quality as an important factor for ranking

Simple and nasty SEO technics, such as keyword stuffing and scraper site, are still popular in China. Baidu and other Chinese search engines put limited effort to reject this kind of pages from the results. An obvious example is the advertisement for hospitals. Most hospitals only have a one-page website very similar to each other, but they still appear on the first page of results.

Professional users have more troubles in using domestic search engines. The desired results seldom appear on the first few pages.

Malicious behaviors on the landing page is another important issue in China. The landing page sometimes may automatically install several extensions without the consent of users. Some landing page abuse cookies to collect information, even install malwares. Domestic search engines have not paid enough attention to the issue.

The relative low wage of internet engineers in China makes it easier to game the algorithm. Chinese firms can create more vicious SEO and malicious behavior pages at much lower cost than their counterparts in developed world.

Bing will face more complex situation when ranking the results. But a little extra effort can help it to distinguish from other players.

Bing should focus the promotion campaign on tier 1 and 2 cities

As discussed in my previous articles (Why Alibaba Succeeds in China: Implications for the Chinese Business Environment, Why Xiaomi Succeeds in China: Implications for the Chinese Business Environment), China is not a single market, but several distinguished markets. Residents in tier 1 cities may earn as much as their peers in New York and Tokyo, while rural dwellers live on several hundred dollars per year. Consumers in tier 1 cities have better education, and better access to information, so they have better opportunities to figure out the different quality between search engines. Moreover, they are more open to new tools.

Win 10 dumped Bing for Baidu in China, which is not a wise move. Consumers have high stickiness towards search engines. The most convenient or the first search engine they used will linger around for long time as long as it can still provide decent results. Qihu 360 expanded its market share rapidly because it is the default search engine for 360 Browser, which has over 20% market share in China. Microsoft should set Bing as the default search engine for Win 10, alluring more consumers to try its offer.