Who is dividing up Baidu's search traffic?

Are your search habits changing too?

In the past, we used to "Baidu search". Today, in addition to "Baidu search", we can "discover new things anytime and anywhere" through Weibo; "record beautiful life" through Douyin; "see every kind of life" on Kuaishou; "mark my life" on Xiaohongshu; "your world of books, movies and music" on Douban; and "go to Zhihu" if we have any questions...

When users realized that Baidu was no longer the center of search, a new battle in China's mobile search field had quietly begun.

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There is still opportunity in the search market

Last week, Baidu reported its Q2 2019 results, which were better than the previous quarter, but net profit was still declining and revenue growth was weak. Baidu is facing severe external challenges, and Robin Li said that "change brings periodic pain."

2019 was a year of transformation for Baidu. It released two financial reports, which brought its once proud and fundamental search business into the spotlight of public attention and put it under the dual test of public opinion and performance.

Baidu was once the king of Chinese search, but as the PC era withdrew from the main stage and mobile Internet became the main stage, the search market changed.

Although Baidu Search is still the search engine with the largest market share in China, accounting for about 80%, and Baidu App has 188 million daily active users, a grim situation is also before its eyes: market competition is surging, its traffic is constantly being divided, dividends are fading, growth is slow, and its business model is controversial. Baidu's good days of making money steadily are gone.

Statistics from Bidachun Consulting show that browser and search engine apps are the main entry channels for mobile search in China, but they are not the only entry points. In addition to browser and search engine apps, shopping, map, video and music, WeChat, news, vertical social apps, etc. occupy a considerable share.

Some netizens said that they would go to Xiaohongshu and Mogujie to search for clothing combinations, search and participate in discussions on celebrity gossip on Weibo and Douban, and interact with strangers on Zhihu. However, these contents may not be found on search engines, and the search experience is not good.

In the era of mobile Internet, super apps occupy more and more users' time and attention, and user demands are also upgrading. On the other hand, the popularity of intelligent and algorithmic recommendations has changed the way netizens obtain information, from active search to passive recommendation.

User behavior and demand send strong market signals, and new players see opportunities.

In 2019, ByteDance's ambition for search began to emerge. The earliest was the launch of the "Search within Account" function in the Toutiao App in January; in March, there were rumors that Wu Kai, the former head of 360 search products, joined as the head of search business. ByteDance responded that the search was online and the product was still in the testing phase. At that time, the Toutiao App could already search for content within the site and some content outside the site.

In August, the "ByteDance Recruitment" official account published a message saying that ByteDance has established a search department and the search team is working hard to create an ideal search middle-office architecture. The search engine is a strong "behind-the-scenes supporter" of many apps such as Toutiao, Douyin, Xigua, Huoshan, and Dongchedi.

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Its recruitment advertisement shows that the search department brings together search technology backbones from Google, Baidu, Bing, and 360 search teams. The team covers ByteDance's recommendation, advertising, IR, NLP, CV and other technologies. "The application and intersection of these technologies give us more opportunities to break through the ceiling of traditional search engines and enhance user experience." It is said that the project has operated tens of thousands of machines.

In addition, ByteDance has also expanded its content pool through acquisitions and investments, such as its recent acquisition of a controlling stake in Hudong Encyclopedia.

Of course, Baidu did not sit idly by and also emphasized its "search + information flow" strategy, laying out the content ecosystem through "Baijiahao + smart mini-programs".

This time, Baidu and ByteDance met head-on in the field of "search + information flow".

Baidu Search Past

Robin Li once said, "Search is the secret of Baidu's success" and "Search is the foundation of Baidu and its core value." In the history of Baidu's development, search has played a very important role.

Looking back at Baidu's nearly 20 years of search history, it started in 1999; in 2000, it launched an independent search portal; in 2001, it shifted from the B-end to the C-end and launched an independent search engine to directly serve users; in 2003, it began to launch products such as Baidu Tieba, Baidu Knows, and Baidu Encyclopedia; it completed its listing in 2005, and its development can be described as smooth sailing.

When Baidu went public in 2005, the domestic search market was still divided into three parts. Data showed that Baidu, Google and Yahoo held market shares of 37%, 23% and 21% respectively.

In 2010, with the exit of Google and Yahoo, Baidu ranked first in the Chinese search market, and its market share was far higher than that of 360 and Sogou, which ranked second and third in the market.

By 2011, Baidu's web search market share reached 83.6%, a record high. In 2015, Baidu's net profit was 33.66 billion yuan, a year-on-year increase of 155.1%. In contrast, in 2018, Baidu's net profit was only 27.6 billion yuan.

At that time, the era of mobile Internet had quietly begun. From 2006 to 2012, China's mobile Internet market grew rapidly at a rate of 84.2%. With the opening of the 4G era and the emergence of mobile terminal devices, the mobile Internet industry achieved leapfrog development around 2014 and 2015.

However, with the full arrival of the mobile Internet era, Baidu Search did not keep up. Instead, affected by negative news about its search business, it began to fall behind.

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In 2016, Baidu encountered the "Hemophilia Bar Incident" and the "Wei Zexi Incident" and was investigated by the National Cyberspace Administration of China. In 2016, the company's revenue showed negative year-on-year growth for two consecutive months in Q3 and Q4. The annual revenue growth rate was only 6%, a record low in the past decade. Baidu faced the dual pressure of public opinion and revenue.

In comparison, the other two giants of BAT, Tencent and Alibaba, have a solid foundation in social networking and e-commerce, and their gaming, entertainment, and financial businesses are thriving. In terms of the performance in fiscal year 2018, Tencent's total revenue was 312.7 billion yuan and its net profit was 78.7 billion yuan, while Alibaba's total revenue was 345.3 billion yuan and its net profit was 69.3 billion yuan. Baidu's revenue was 102.3 billion yuan and its net profit was 27.6 billion yuan. Baidu's position in BAT is obviously awkward.

As 2019 began, the market situation became increasingly severe. Baidu paid more attention to search than in previous years and began to consolidate its foundation and build its own search wall.

Start the search and defense war

Since the beginning of this year, from frequent changes in management to the implementation of new strategies, Baidu has begun to defend its search business in multiple ways.

In May 2019, Baidu released its Q1 financial report, which showed its first quarterly loss since its listing, and Baidu's core performance was not good. At the same time, the management was shaken. Xiang Hailong, who had worked at Baidu for 14 years and was in charge of the search business, left the company. His successor was Shen Dou, who Li Yanhong believed "had made a great contribution to the growth of the company's search and information flow business."

On the one hand, there are changes in management, and on the other hand, Baidu has proposed a mobile ecosystem. Robin Li said in an internal letter that the dual engines consisting of "search + information flow" and the dual ecosystem consisting of "Baidu Account + Mini Programs" have further consolidated the status of Baidu App as a super portal. Smart Mini Programs build a new content and service ecosystem, with 270 million monthly active users, 150,000 Mini Programs, and 271 subcategories.

In addition to search, Baidu seems to be trying to work hard on information flow to defend against ByteDance.

In fact, Baidu has been paying attention to information flow business since 2016. At the Baidu World Conference in 2017, the slogan of Baidu App was updated to "Search when you have something to do, watch when you have nothing to do", and it is said that it was Shen Dou who proposed it. Behind this change is Baidu's addition of information flow products to search. The "search + information flow" dual engine strategy began to take shape at that time. On the Baidu Encyclopedia, the description of Baidu App is a smart product in the mobile Internet era that combines search functions and intelligent information recommendations.

However, Toutiao, which excels in algorithmic recommendations, has emerged as a dark horse, and Baidu has not seized the best opportunity in terms of information flow.

Not long ago, when talking about competition, Shen Dou could only say that the search business is very profitable and it is not uncommon for new companies to enter this market. However, he believes that the entry threshold of the search industry is very high. It is still very simple to switch from search engines to information flow. You only need to summarize the interests of users from their searches. It is difficult to do the opposite because information flow is to match users' broader interests.

Competition from ByteDance is only one aspect. Faced with the diversion of more vertical content products, Baidu wants to aggregate applications through smart mini-programs.

In July 2018, when Baidu Smart Mini Programs were launched, Shen Dou mentioned that in the era of mobile Internet, various apps have fragmented the entire user experience. Baidu launched Smart Mini Programs and Baijiahao in the hope that the Internet should be interconnected and equal, in order to solve the problem of fragmentation in the mobile Internet.

Different from WeChat mini-programs, some industry insiders believe that mini-programs are more about activating traffic for search and content platforms; while the purpose of WeChat mini-programs is to improve the ecosystem and allow developers to develop more good applications to serve the 1 billion WeChat users.

In March 2019, Baidu Search fully integrated with Smart Mini Programs, and began to open up more traffic to Mini Programs and increase their weight. Baidu wants to activate and attract more traffic through Mini Programs.

However, although users can search for content from content platforms such as Qutoutiao, Xiaohongshu, Kuaishou, Bilibili, 58.com, and Qijiawang through smart mini-programs in the Baidu App, after aggregating the content platforms, how to make users of these platforms willing to stay in the Baidu App and form the user habit of "taking a look when they have nothing to do" is still a long way to go for Baidu's "search + information flow" strategy.

New era of search

In the past, search was more of a tool, and users used it with a strong purpose, and it was normal to leave after using it. But now, when players like ByteDance enter the market and start using short videos, information streams and other content to influence search habits, users will stay longer when searching for information, and their addiction will increase.

When people's needs are no longer just information but services, the ways of searching become more diverse.

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Nowadays, user habits are subtly influenced and they will look for the information they need from different products. In addition, user needs have changed. For example, while searching for information and browsing news, they also want to socialize, interact, shop, listen to music, watch videos, etc. In the future, more interactive vertical entertainment apps will continue to divide the search traffic.

This may be one of the reasons why the top players are focusing on the "search + information flow" strategy. As the Baidu App slogan says, "Search when you have something to do, and read when you have nothing to do", it is obvious that in addition to searching, it also emphasizes user retention.

In addition, as mobile search is about to usher in a new market structure, whether it is Baidu, ByteDance, or other products in the industry, they have to pay attention to the new problem of information islands. Zhou Yuan, the founder of Zhihu, said, "The information island problem that everyone faces and the problem of the increasing cost for users to obtain high-quality content are the same."

This is different from the PC era, when search engines were the main entry point for users to obtain information. With the advent of the mobile Internet era, various vertical mobile apps have taken away some target users and traffic with obvious attributes. Every super app in the vertical field has the ability to occupy enough of the user's time and attention.

Mobile apps such as Toutiao, Zhihu, and Xiaohongshu are more of a closed content loop, and the search needs of mobile Internet users are distributed across different information islands.

This year, the aggregation effect and demand have become significantly larger. Baidu and ByteDance are both investing heavily in search-related content products. For example, Baidu has recently invested in products such as Kaishu Storytelling, Guokr, and Zhihu, aggregating content products or communities through mini-programs, and ByteDance also holds a controlling stake in Hudong Baike. Filling and reserving content for search has become an important task before the war.

However, it is still difficult to truly break down information silos.

TMT industry commentator Zhang Shule believes that whether it is from search to content (Baidu's past approach) or from content to search (Toutiao's current intention), these are actually "closed loop" attempts that Internet giants have been trying to make.

However, he also said that such a "closed loop" is ultimately open, open to various partner platforms and excluding pure competitors. After all, no manufacturer or alliance can truly achieve big and comprehensive in the field of mobile Internet.

It is worth noting that in the future, if ByteDance becomes a strong competitor in the mobile search market, new issues and controversies surrounding natural search rankings, the fairness and objectivity of search results will continue to arise, and the industry landscape will continue to change.

Everything is flowing, nothing is permanent. China's Internet search has been around for 20 years, and a new search story will begin. Whether Baidu's era is over or not, we will have to wait and see how this battle unfolds.