When the 34-year-old Charles Zhang decided to change the name of his company from Beijing ITC to Sohu.com in 1998, one reason was that it sounded similar to Yahoo!, signalling his ambition to become China's Yahoo!.

But one more important reason was that the meaning of the Chinese name was "Search Fox," because search was another dominant application on the Internet with e-mail at that time.

Six years later, Sohu shifted its focus again to search engine and launched a search engine called Sogou.com, whose Chinese name means "Search Dog."

Sohu was only one of the many companies to strengthen its position in the search engine market in 2004 alongside its arch-rivals Sina Corp and Netease.com, and professional search engine provider Zhongsou.com. This proves to be a new gold mine after online advertising, mobile phone messages, and online games.

Their decision was wise enough, as the market maintained its fast-track development in 2004, but most of them might not be able to feel happy about the results, as the statistics from some research firms showed recently.

Golden time

Henry Yang, president of Shanghai iResearch Co Ltd, a professional Internet industry consulting firm, told China Business Weekly last Thursday that the scale of the search engine market including advertising, paid listings and real name searches will exceed 1.2 billion yuan (US$145 million), from 500 million yuan (US$60.39 million) in 2003.

It also beat iResearch's 840 million yuan (US$101 million) forecast made last January.

He said the company will release its annual report this month, but preliminary results are very encouraging.

One major reason for this momentous growth was that an increasing number of enterprises were willing to spend more on using search engines as a promotional tool.

An iResearch report last May stated 260,000 businesses spent an average of 1,923 yuan (US$232) on search engine in 2003, but the number of businesses will rise to 360,000 last year and the average spending will increase to 2,333 yuan (US$282).

The result of another market research house CCID Consulting Co Ltd and information technology portal CCIDNET.com also released their annual report on the search engine market on December 22 and said the scale of the market reached 940 million yuan (US$114 million) last year.

Chen Wen, deputy general-manager of investment consulting centre of CCID Consulting, predicted that the market will grow at an annual average of 60 to 70 per cent and reach 2.61 billion yuan (US$315 million) in 2006.

She pointed out that increasing investment in the market was another major factor for this growth.

In 2004, Sohu, Sina, and Zhongsou all released upgraded products, while the US giant Yahoo! China consolidated its search engine service with the launch of its search engine platform Yisou.com and the world's No 1 search engine provide Google.com invested in its Chinese counterpart Baidu.com.

Established positions

CCID Consulting's Chen said that since search engines remain a technology-driven product, it is easier to form monopoly, compared with e-mail and online games, due to technological barriers and the concentration of both enterprise and consumer users.

The Beijing-based research house said in its report that Baidu has become the biggest player in the market with 32.9 per cent of the share, while Yisou under Yahoo! ranked the second with 19.6 per cent of the pie.

Chen divided the top players into two camps: Yisou, Yahoo! China, and 3721 under Yahoo!, versus Baidu and Google in the Google camp.

The results from iResearch also showed a similar scenario with Baidu, Yahoo and Google ranking in the top three.

Yang believed it would be hard for most of other players to make breakthroughs in challenging the top three's positions.

Chinese search engine provider Baidu has expanded its market share with a long-time focus on providing search engines to local customers and gained 1.4 percentage points in the second half of the year to 36.29 per cent, according to iResearch.

"Although many companies tried to penetrate into the market in various strategies, the statistics of iResearch showed our leadership was intact," said Robin Li, CEO of Baidu.

US giant Yahoo! was another major gainer in 2004.

"We are beginning to reap a harvest from our investment and became the biggest winner last year," said Zhou Hongyi, president of Yahoo! China.

Yahoo! acquired the Chinese real name search service provider 3721, founded by Zhou, for US$120 million in 2003 and moved 1,000 search engine servers to China to expand in the market.

However, Yang warned that Microsoft's MSN will be one new player worth a lot of attention in the market.

"MSN is surely a dark horse in the market," he said.

Although Microsoft is cautious about bundling its operating system or Internet Explorer software with its search engine, its strength is huge.

The US software giant held a high-profile launch of its MSN Messenger 7.0 in China last November, which was believed to be a sign of its entry to the Chinese market.

MSN Messenger currently partners with Yahoo!'s 3721 in some search services.

(Business Weekly 01/07/2005 page15)