Search Engines = Friends or Foes?
+8* China Japan KoreaPublished January 9, 2009 at 5:54 pm 1 CommentSearch engines bring traffic to websites. So far, they seem like online media’s best friends.
But is that really the case? After meeting many media outlets in Japan, Korea, China and Europe, here is what we found:
China | Youku blocks Baidu
Since mid-December 2008, Youku, one of the top 3 Chinese online video sites, has started to block the video search of Baidu (#1 online search engine in China). That means users cannot find any result related to Youku with Baidu video search, which is estimated to have contributed at least 30% of traffic for Youku.
According to an interview by local media, “The strategic cooperation between the Youku and Baidu was successful. The blocking of Baidu video search is to protect the video experience of users who directly visit its website, because the loyalty and value of these users are relatively higher than those who search videos via search engines”, explained Youku.
To our point of view, another explanation which sounds more reasonable should be that it is a way to reduce the traffic from users with low engagement, so as to cut the relevant costs on bandwidth and server to ease the financial pressure and deal with the economical crisis.
The model, Youtube, is still not profitable. Advertising revenues grow more or less “linearly” due to the B2B sales process. However, content grows much faster than revenue. Costs follows content and the value/content thus goes down. It is a burning question whether the ad-only business model might be flawed for online video/TV market.
The reduction of traffic, like what is doing Youku, could cut costs. However, it is based on the sacrifice on user base. The more active ways should be to accelerate the revenue growth while diversifying the monetization such as Pandora TV in Korea and Nico Nico Video from Japan.
Korea | Is Naver royalty?
In 2008, we met with several online media in Korea and if names are different, the situation was the same or even worse than in other advanced markets. Naver’s share of search is so enormous that it represents a large share of traffic not only for online media (be it the web outlet of offline newspapers or magazines), but also for e-commerce sites! Some of them would simply go bankrupt if Naver stopped crawling them. Taobao announced some time ago they decided to block Baidu, but is that a sustainable position? Korean e-commerce companies face a more competitive environment and such a move would kill them. Could Amazon afford to block Google from crawling their site? What would happen if Google decided to block them?
Europe | Google vs. The Media
In a recent meeting in December involving several large traditional media groups – most of them currently soul-searching as banner advertising is dropping in favor of search advertising – Google was under fire and labeled “the worst enemy” by one the chief executive of one of leading media groups in Europe. Notably, Google’s ability to set prices with almost no competition. But when half of most online media’s traffic is coming from search engines, it is hard to do without…
Unconclusive conclusion
Search = Friend or Foe for other online media is still debatable. It might depend on the maturity of the service. For instance, search could be good until a website reaches the top spot in mind share, then becoming a destination site that people access directly. Is sharing with search caring for users? Is it giving up valuable assets as each page becomes a “top page”? Maybe there is a need to change the concept of “top page” altogether.
To know more, we’ll follow what happens to Youku which is in a special situation as:
- it is not a clear leader (like top e-commerce sites in Korea or media sites in Europe, and unlike Taobao in China)
- it is not profitable (like most in its category)
- it is dependent on advertising (a media B2B play)
yet it decided to block the leading search engine.
For more details on the business model analysis of online video/TV market and some of successful cases, here is the link to a previous report on the presentation we did at the “New TV, New Era” seminar at OrangeLabs Beijing in December.
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