Where are the Huge Business Opportunities in Search Engine Marketing in China?

What is Search Engine Marketing?

Search engine marketing is a digital marketing method that refers to the use of search engines to market and promote products, services or brands. Specifically, it refers to the process of enterprises improving the ranking of their own websites or products in relevant search results by optimizing website construction, content generation, link building, etc., based on the rules and algorithms of search engines, and realizing traffic acquisition and monetization. Compared with traditional marketing, search engine marketing has the characteristics of high accuracy, real-time and quantifiable. By analyzing user search data and interests, target users and marketing touch points can be accurately located. The ranking on the search engine page directly affects the search traffic and page views obtained by the enterprise, and the marketing effect is quickly visible. Data such as click-through rate, browsing time and conversion rate also make the input-output of search engine marketing highly quantified, making it easy for enterprises to manage return on investment and optimize strategies.

The scale of China's search engine marketing industry

In 2022, the Chinese search engine marketing market will reach RMB 79.67 billion. However, given the expansion of the Internet advertising market and the weakening enthusiasm of advertisers for search engine marketing, the market size of China's search engine marketing industry will show a trend of slowing growth in the next five years. It is estimated that by 2027, the market size will be RMB 126.95 billion, with a compound annual growth rate (CAGR) of 9.77%. The underlying logic of the growth and then decline of the Chinese search engine marketing industry market size is the rapid rise of new advertising forms such as short videos, social media and native advertising, as well as the growing demand for diversified marketing channels by advertisers.

(1) Short video platform advertising: With the rapid rise of short video platforms such as Douyin and Kuaishou, these platforms have attracted a large number of advertisers with their massive user base, precise recommendation algorithms and rich content formats. According to statistics, the scale of China's short video advertising market reached 250 billion yuan in 2021, a year-on-year increase of 35%, far exceeding the growth rate of search engine marketing. This shows that short video platform advertising has become the first choice of advertisers, putting pressure on the market share of search engine advertising.

(2) Social media advertising: Social media platforms such as WeChat, Weibo and Xiaohongshu provide advertisers with more abundant communication channels. Advertisers can achieve brand communication and fan interaction by cooperating with opinion leaders (KOLs) and conducting online activities. In 2021, the scale of China's social media advertising market reached 120 billion yuan, a year-on-year increase of 20%, indicating that the impact of social media advertising on the search engine marketing market is gradually emerging.

(3) Native advertising: Native advertising, with its natural and unobtrusive form, can better attract users' attention and increase click-through rate. Some large portals and information apps have joined the camp of native advertising, helping to expand the scale of the native advertising market. In 2021, the scale of China's native advertising market reached 60 billion yuan, a year-on-year increase of 15%, occupying a place in the advertising market.

China Search Engine Marketing Industry Classification

China's search engine marketing industry is mainly divided into search engine optimization (SEO), paid search advertising (PPC) and DSP advertising according to the form of advertising. Among them, SEO is suitable for long-term stable promotion, PPC is suitable for short-term rapid promotion, and DSP is a more advanced advertising model that can achieve more accurate targeting and optimization. Enterprises can choose a marketing strategy that suits them according to their own needs and budget. It is worth noting that with the continuous development of search engines and digital marketing technologies, the search engine marketing industry is also constantly changing and developing, and needs to be selected and adjusted based on actual conditions.

SEO is a strategy to optimize the content and structure of a website so that it can get a higher ranking in the natural search engine rankings, thereby obtaining more organic traffic. SEO usually includes technical optimization, content optimization, and external links. Companies can use SEO to improve the weight and visibility of their websites, thereby obtaining more organic traffic. Compared to PPC, SEO does not require direct investment, but it does require more time and effort.

PPC is a strategy that places ads on search engine results pages through bidding. When users click on ads, advertisers need to pay a certain fee to obtain traffic. PPC usually includes keyword bidding and ad creative production, which can accurately target users, and the effect can be measured and adjusted in real time. PPC is suitable for short-term rapid promotion and can obtain clearer results and benefits. Compared with SEO, PPC requires direct investment.

DSP advertising is a real-time bidding advertising platform that allows advertisers to place ads in real-time bidding to achieve precise targeting and optimization of results. DSP advertising is similar to PPC advertising, but is more advanced and flexible, and can help companies achieve more precise targeting and optimization. Compared with PPC advertising, DSP advertising requires higher technology and delivery thresholds.

The development history of search engine marketing in China

During the development and evolution of China's search engine marketing industry, some important events and major turning points have had a profound impact on the industry:

(1) Baidu becomes the market leader: In 2000, Baidu was founded and launched its search engine service. With its advantage in Chinese search, it gradually became the leader in the Chinese market. This event had a significant impact on the Chinese search engine marketing industry and provided a brand new marketing platform for Chinese companies.

(2) Google’s withdrawal from the Chinese market: In 2010, Google announced its withdrawal from the Chinese market, which made Baidu’s position in the Chinese market more solid. This event further consolidated Baidu’s leadership in the search engine marketing industry.

(3) Popularization of mobile Internet: With the popularization of smart phones, mobile Internet has quickly become the main way for Chinese Internet users to access the Internet. This has led to the shift of the search engine marketing industry from PC to mobile, providing advertisers with more advertising channels.

(4) Application of new technologies: The application of new technologies such as big data and artificial intelligence has made advertising more precise and intelligent. This trend will continue to influence the future development of China's search engine marketing industry and improve advertising effectiveness and the ROI of corporate advertising.

(5) Improvement of regulatory policies: In recent years, the Chinese government has strengthened supervision over the Internet advertising industry and issued a series of policies to regulate the industry order. This will help improve the overall quality of the industry, protect consumer interests, and promote the sustainable development of the industry.

Germination period 2000~2006

This stage is marked by the rise of Google and Baidu. Search engine advertising has just started, with keyword advertising as the main form. Enterprises gradually realize the value of search engine advertising and begin to try to use search engine marketing (SEM) to promote their products and services. During this stage, the industry is small in scale and the competition is relatively weak.

Start-up period 2007~2012

With the continuous growth of the number of Internet users and the increasing demand for search engine marketing by enterprises, China's search engine marketing industry has entered a period of rapid development. During this stage, the market size has expanded rapidly, various types of enterprises have flocked in, and competition has intensified. At the same time, search engine optimization (SEO) and other forms of advertising have also begun to rise, and the industry has gradually diversified.

Rapid development period 2013~2018

With the popularization of mobile Internet, search engine marketing has gradually shifted from PC to mobile.

During this stage, the industry began to try various innovative advertising forms, such as short video ads, native ads, etc. New technologies such as big data and artificial intelligence began to be applied to advertising to improve advertising accuracy and effectiveness.

Maturity period 2019~Present

Multi-channel integrated marketing has become a trend. Companies not only focus on search engine marketing, but also organically combine social media, short videos and other marketing methods. At the same time, regulatory policies are gradually improved and industry order is improved.

During this stage, the industry gradually matured. While pursuing advertising results, companies paid more attention to the refined management and optimization of advertising.

Characteristics of China's search engine marketing industry

China's search engine marketing industry is in a stage of rapid development, showing the overall characteristics of " mobile inclination, diversified marketing forms and enhanced technological elements " .

1. Mobile Tilt

Mobile Internet helps China's search marketing shift to mobile optimization. With the rapid popularization of mobile Internet, China's search engine marketing industry has shown a trend of mobile inclination. According to data, the number of mobile search engine users in China will reach 750 million in 2022. When conducting search engine marketing, companies need to take mobile optimization into consideration and provide mobile-friendly websites and advertising formats.

2. Diversification of marketing forms

Diversified advertising formats help China's search marketing. In addition to traditional PPC advertising formats, China's search engine marketing industry has also seen the emergence of a variety of other marketing formats, and companies can choose a variety of advertising formats for delivery. For example, short video ads, brand searches, and other formats are growing and developing. In addition, the emergence of various new advertising formats also provides companies with more diverse advertising methods, including native ads, voice searches, and more.

3. Technical element enhancement

New technologies help China's search engine marketing to improve accuracy and ROI. With the continuous emergence of new technologies, China's search engine marketing industry is also constantly strengthening technological elements. For example, technologies such as artificial intelligence and big data are being widely used in search engine advertising. The application of these technologies can help companies more accurately locate users and optimize advertising effectiveness.

Analysis of China's Search Engine Marketing Industry Chain

The upstream of China's search engine marketing industry chain is mainly advertisers, the midstream mainly involves search engine platforms and technology providers , and the downstream is users, including enterprises and individuals. Among them, upstream enterprises provide demand for the entire industry . Midstream enterprises provide infrastructure and technical support for the entire industry, such as Baidu, Sogou and 360. Their core competitiveness lies in search technology, algorithms, data processing and cloud computing. The downstream is the target users of search engine marketing.

Upstream of the industry chain

In China, search engine marketing has become one of the main choices for advertisers in many industries. Advertisers in the following industries are particularly fond of using search engine marketing to promote their products and services in China.

(1) E-commerce: China's e-commerce market has achieved explosive growth in the past few years, and its market size has surpassed that of the United States. According to data, more than 50% of China's e-commerce advertising expenditure comes from search engine marketing. E-commerce platforms such as Alibaba, JD.com, and Pinduoduo have invested heavily in SEM to attract consumers to buy goods.

(2) Education and training: The education and training industry is another major market for search engine marketing in China. According to data, search engine advertising spending in China's education and training industry increased by about 30% between 2019 and 2021. Well-known educational institutions such as New Oriental and TAL Education Group have used SEM to promote online courses, subject tutoring and other businesses.

(3) Tourism: Tourism is also an important area for search engine marketing in China. It is reported that online travel service providers such as Ctrip and Qunar have invested heavily in search engine advertising spending. Between 2019 and 2021, search engine advertising spending in China's tourism industry increased by about 20%.

(4) Financial services: With the development of Internet finance, more and more financial service providers choose to attract customers through search engine marketing. Companies such as China Merchants Bank and Ant Financial place advertisements on search engines to promote their credit cards, financial products and other businesses. According to data, search engine advertising expenditures in China's financial services industry increased by about 25% between 2019 and 2021.

(5) Automobile industry: The automobile industry is also an important market for search engine marketing in China. Automobile manufacturers such as Changan Automobile and SAIC Motor use search engine advertising to attract consumers to learn about the latest models, discounts and other information. According to statistics, search engine advertising expenditures in China's automobile industry increased by about 15% between 2019 and 2021.

Enterprise users focus on return on investment, cost control, platform screening, precise positioning and data-driven optimization in order to maximize the return on marketing investment.

(1) Advertising effect: This is the core factor that enterprise users are most concerned about. They hope to gain more attention and traffic through search engine marketing, thereby improving conversion rates. For example, after a well-known catering brand launched Baidu SEM advertising, the number of website visits increased by 50%, and it brought in 2,000 valid orders within a month, resulting in a 15% increase in sales. This kind of data analysis of advertising effect is crucial for users.

(2) Delivery cost: As an enterprise, it is very important to control costs. Downstream users are concerned about reducing delivery costs as much as possible under the premise of effective promotion. According to data, between 2019 and 2021, the average cost per click (CPC) of search engine marketing in China showed a downward trend, with a drop of 10%, which is undoubtedly good news for downstream users.

(3) Platform selection: Different search engine platforms have different user groups and characteristics. Downstream users will make choices based on their own needs and target customers. Taking Baidu, 360 Search, and Sogou Search as examples, according to data, Baidu is still the search engine with the highest market share, accounting for more than 70%, while 360 Search and Sogou Search account for 15% and 8% of the market share respectively. Downstream users need to combine their own needs, comprehensively consider the advantages and disadvantages of major search engines, and choose a suitable delivery platform.

(4) Positioning and accuracy: Downstream users have high requirements for the positioning and accuracy of advertising, hoping to reach target customers as much as possible. For example, accurate advertising can be achieved through keyword positioning, regional positioning, time positioning, etc. An e-commerce company placed advertisements targeting the keyword " maternal and child products " and limited the advertising areas to second- and third-tier cities, successfully increasing the click-through rate and conversion rate of the advertisements.

(5) Data analysis and optimization: Downstream users hope to be able to understand the effect of advertising in real time so that they can make optimization adjustments based on the data. The function and accuracy of data analysis tools directly affect user decisions. For example, well-known travel companies such as Ctrip, Tuniu, and Mafengwo all use data analysis to improve advertising effects and reduce costs.

Midstream of the industry chain

With its broad user base, high conversion rate, rich marketing channels, continuous optimization capabilities and cost controllability, China's search engine marketing helps companies expand their markets, enhance their brand influence and achieve sales growth.

(1) Broad user base: According to data, as of June 2021, the number of Chinese Internet users has reached 1.017 billion, accounting for 28.7% of the world's Internet users. The huge user base provides a broad market space for search engine marketing.

(2) High conversion rate: Through keyword screening and targeted delivery, search engine marketing can accurately reach potential customers and improve advertising conversion rate. For example, after an e-commerce company conducted search engine marketing, its advertising click-through rate increased by 25%, and its order conversion rate also increased by 15%.

(3) Abundant marketing channels: The Chinese market has a variety of search engines and content platforms, such as Baidu, Sogou, 360 Search, Zhihu, etc., which provide enterprises with marketing channels with different characteristics. Enterprises can choose the appropriate platform for promotion according to their own needs.

(4) Continuous optimization: Search engine marketing allows companies to track advertising effectiveness in real time and make adjustments and optimizations based on data analysis. For example, after a mobile phone brand was promoted on Baidu, it was found that users paid more attention to " cost-effectiveness " and " camera function " , so it adjusted the advertising copy to emphasize these two features, thereby further improving the advertising effect.

(5) Cost control: Enterprises can formulate flexible delivery strategies based on budgets and goals, such as setting daily budgets and click costs, to achieve cost control. When a small and medium-sized enterprise was conducting search engine marketing, it improved the cost-effectiveness of advertising by finely managing its advertising budget.

There is fierce competition among Chinese search engine marketing technology providers to help with targeted advertising and improve user experience. First, the competition among major technology providers is becoming increasingly fierce. In the Chinese search engine marketing market, in addition to giants such as Baidu, other technology providers such as Sogou, 360 Search, and Shenma Search are also actively competing for market share.

Secondly, technology providers play a key role in improving the effectiveness of advertising. Through artificial intelligence, big data analysis and other technical means, technology providers can help advertisers achieve precise delivery and improve advertising effectiveness. For example, Sogou has powerful Chinese word segmentation technology, which can accurately understand users' search intent and provide more accurate search results. In addition, 360 Search provides users with a safe search environment with its powerful security protection technology. According to data, in 2021, Sogou and 360 Search accounted for 12% and 10% of the Chinese search engine market respectively.

Downstream of the industry chain

When Chinese individual users use search engines to search for information, they are more likely to be attracted by personalized targeted ads, video ads, native ads, and question-and-answer ads.

(1) Personalized targeted advertising: With the help of big data and artificial intelligence technology, major search engines can provide users with highly personalized advertising recommendations based on information such as users' search history, interests, hobbies, and consumption habits. For example, after a user enters " travel destination " in a search engine , advertisers may display hotel and attraction advertisements related to the user's travel interests. According to data, the click-through rate of personalized ads is 42% higher than that of traditional ads.

(2) Video ads: Video ads featuring vivid visual effects and rich storylines are popular among users. According to data, the click-through rate of search engine video ads in China in 2021 was 25% higher than other forms of ads. For example, an ad for a smart home product released by an e-commerce platform received a large number of clicks and attention through an immersive scene display.

(3) Native advertising: Native advertising seamlessly integrates advertising content with search engine content, making it difficult for users to detect the presence of advertising when browsing search results, thereby increasing click-through rates. For example, a fitness course is displayed as a tutorial article on the search engine results page, and users may be unknowingly directed to the advertising page while reading. According to statistics, the click-through rate of native advertising is 33% higher than that of traditional advertising.

(4) Question and answer ads: In response to users’ search needs, advertisers can display advertising content in the form of questions and answers to increase user engagement. For example, an insurance company published a question and answer ad on a search engine about insurance knowledge, which not only met users’ needs to understand insurance, but also demonstrated its product advantages. According to data, the conversion rate of question and answer ads in 2021 was 30% higher than that of traditional ads.

Competition landscape of search engine marketing in China

The competition landscape of China's search engine marketing industry is dominated by Baidu, with 360 Search and Sogou Search as the main competitors. According to data, Baidu has a market share of 68% in China, ranking first in the industry. Tencent Soso has a market share of about 13%, ranking in the second tier . 360 Search has a market share of about 10%, closely following. Sogou Search has a market share of about 8%, which is also quite competitive.

Baidu has attracted a large number of users and consolidated its market position by virtue of its rich search results and wide coverage. Tencent Soso has maintained a stable market share by relying on Tencent's huge user base and social resources. 360 Search has expanded its market share by bundling with products such as 360 Security Guard and 360 Browser. Sogou Search mainly relies on products such as Sogou Input Method and Sogou Browser to attract users.

The future market competition landscape of China's search engine marketing industry will be mainly influenced by two trends: artificial intelligence applications and the development of semantic search.

(1) Application of artificial intelligence: With the continuous development and application of artificial intelligence technology, more and more search engine marketing companies will use AI technology to optimize their products and services and improve user experience. The application of AI technology not only helps to improve the relevance of search results, but also helps search engine marketing companies to more accurately locate user needs, thereby providing users with more accurate advertising recommendations. In addition, AI technology can also help companies analyze large amounts of user data more efficiently and provide strong support for marketing strategies. Take Baidu as an example. The company has been actively committed to the research and application of AI technology. According to data, Baidu's AI technology has achieved remarkable results in search result ranking, advertising recommendation and personalized push. It is reported that Baidu's success rate in using AI technology to improve the relevance of search results is as high as over 80%. In addition, Baidu has also successfully used AI technology to provide advertisers with more accurate delivery plans, further improving the conversion rate of advertisements.

(2) Development of semantic search: With the advancement of natural language processing technology, search engines have gradually turned to semantic search, that is, by understanding the context and meaning of search terms, to provide users with more accurate and rich search results. Compared with traditional keyword search, semantic search can better meet the personalized needs of users and provide users with information that is closer to their actual needs. Take Sogou as an example. The company launched an upgraded version of Sogou search engine based on semantic search in 2019. It is reported that the engine uses advanced natural language processing technology, which can understand and analyze the sentences entered by users, thereby providing users with more accurate search results. In addition, Sogou also uses semantic search technology to provide users with personalized recommendation services, which greatly improves users' search satisfaction.