Google's exit; Baidu's monopoly will cause advertisers to reevaluate search spend in China.

As the US Secretary of State stepped away from the podium last week after her speech on the global Internet, and as the approbation for Google’s ostensibly principled decision to depart the Chinese market tapered off, the advertising industry in China began to grapple with the sobering implications of Google’s possible abandonment of the Chinese-language search scene.

A few days spent asking some questions among marketers in the nation’s capital suggested that Google’s departure is causing many to cast a more probing eye on its homegrown rival.

Advertisers were not happy with the prospect of having a large piece of their digital marketing held captive by a monopoly player. Rumours were already surfacing about the possibility that Baidu would begin raising rates. News from inside Baidu did not help: the sudden departure of two of its senior executives and Baidu’s decision to wade into the hyper-competitive and politically-fraught online video business raised concerns that the local search giant might lose its focus on the search ad business.

Beijing-based marketers also said they believed that without a strong competitor, Baidu would be unmotivated to improve its offerings, its practices, and its value to advertisers. Lacking the prod of a Google, they reasoned, why would Baidu invest more in search?

I learned a lesson early in my career: competition is not only good for customers; it is also good for competitors. Several companies selling a product or service demand us to ask: “Which vendor should I choose, and how much budget do I have for this?” But a single company selling a product requires us to ask: “Who are these guys?”

To be sure, there are other players (Sogou is one, and QQ parent Tencent is known to be testing a search engine) and it is possible that one will rise to take Google’s place.

But for many advertisers in China, Google’s departure will force a re-evaluation of the role search advertising plays in our marketing plans, and the earnest effort to find more creative and effective ways to spend our online dollars.

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This article was originally published in the 28 January 2010 issue of Media.