Tuesday, August 30,
Technology / Page: 2
China search market does not
have to evolve the US way
Michael Logan, Technology Editor
Google "Google", "Altavista"
and "history" in the same search and you will find thousands
of references recounting how Altavista was once the top
search engine until the company founded by Larry Page and
Sergey Brin came onto the scene.
The lesson for
any competitor in the quickly changing internet industry is
this: market leadership can be short-lived and incumbency
appears to have been forgotten by the investors of Baidu.com,
presently the largest player in China's nascent search
engine market and worth US$2.5 billion on the Nasdaq market.
reported a 381.8 per cent rise in quarterly earnings to
US$1.5 million last week, but even this growth makes the
enormous market capitalisation difficult to justify.
betting that Baidu is the Google of China or, even better,
that Google will eventually buy Baidu outright. But neither
company is the presumptive winner in the mainland search
market, and long-term success is far from assured.
What makes a
good search engine company? One factor is having great
search technology, the ability to provide the information
When it comes
to this task, Baidu and Google excel, with a 37 per cent and
23 per cent share of user queries respectively, according to
But there is a
host of upcoming companies that claim to be developing
better technologies, designed specifically for the
challenges of Chinese-language search.
start-up YDCTech hopes to replace "keyword" searches with
"semantic-based" tools that were originally designed to
understand the structure of DNA.
software examines the Chinese language in a "bottom-up"
manner, treating ideographic characters as the basic units
of the Chinese language, and from there attempting to
understand vocabulary and syntax.
It is difficult
to say whether this approach will lead to better search
results, as YDCTech claims, but the company has been
scouting for investment and reportedly in talks with several
start-up is Cgogo.com, which offers mobile search to China
Unicom and China Mobile. Cgogo claims its technology uses
"fuzzy search and concept clusters rank algorithms",
grouping results in "concepts."
company is Zhongsou Online Software. Last week, its Hong
Kong-listed parent HC International announced the sale of
42.5 per cent stake worth US$4.74 million to venture capital
investors, a move that could eventually lead to Nasdaq
Any of these
companies, or some other unknown company, could easily
develop a search technology to make Baidu and Google the
Altavista of China.
thing needed is a great sales organization to win
advertising from China's small and medium-sized enterprises
(SMEs), and this is something Google lacks.
It may also be
why Google has taken a 2.6 per cent stake in Baidu - which
had US$13.4 million in sales last year, in a market worth
US$113.5 million - and why many think Google will eventually
try to acquire its mainland counterpart. This speculation
was renewed after Google announced it would raise as much as
US$4 billion in secondary stock offering.
Yet in terms of
sales to SMEs, the present market winner is not a search
company at all. That title belongs to business-to-business
portal Alibaba.com, which has a US$68 million in annual
the mainland search market might not develop in the same way
as it has in the United States.
companies look for business at home and abroad, they might
find the services of a dedicated e-commerce portal such as
Alibaba more valuable than search engines, which attract
visitors looking for "free" MP3 files just as much as they
do business users.
presently enjoys better relationships with SMEs, and any
contender in the search market will have to compete with it
for marketing dollars.
that popularity in China does not guarantee financial
success. In its stock prospectus, it says: "Even in
countries where we have a significant user following, we may
not be as successful in generating advertising revenue due
to slower market development."
As for Baidu,
the search company could wind up looking more like iTunes
than Google, thanks to China's unique characteristics.
About 22 per
cent of its search traffic is related to MP3s, many posted
to the internet in violation of their owners' copy rights.
this traffic and keep in good with the record labels, Baidu
is reportedly planning to launch a paid MP3 service, through
which users can download legitimate song files.
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