Baidu Introduces New Keyword Bidding System: Phoenix Nest

[engine]

Baidu Introduces New Keyword Bidding System: Phoenix Nest [reuters.com]

China's top search engine Baidu Inc (BIDU.O) said a bumpy introduction for its new system to sell search-based advertising will hit its business into the first quarter of next year, sending its shares tumbling more than 10 percent.

The bumpy ride marks a rare stumble for Baidu, China's homegrown search leader with about two-thirds of the market, and could open the door for envious rivals, most notably Google (GOOG.O), to grab some of its share in the world's largest Internet market by users.

Baidu, which will discontinue its old keyword bidding system and fully implement its Phoenix Nest advertising system on Dec 1, said its fourth-quarter revenue will come in at $174-$180 million, more than 10 percent below the average analyst estimate of $204.7 million, according to Thomson Reuters I/B/E/S.

[bill]

I've heard people from China commenting that AdSense/AdWords is a better product than what Baidu is offering. A new system for Baidu could only help.

[makemetop]

We have several 100K keywords running now on Baidu's Phoenix Nest system (via API) since migration to the new system started recently and the facilities are far more "Google-like" than the old "Classic" system and should be recognisable to people familiar with Google.

The ability to select regions within China to target is also very useful.

We have been informed that the Classic API will also cease to operate from 1st December but most big advertisers seem well on the way to migrating their accounts to the new layout.

[bill]

I thought it was pretty unusual to see Baidu show a healthy increase in profits and yet the stock tanked. I guess investors are putting a lot of importance on this new Phoenix system. What's the big deal? Aren't most Baidu PPC customers already on the new system anyway?

I guess I'm just not clear on why they're talking about a "temporary negative impact" on fourth-quarter revenue due to this switch.

[makemetop]

Aren't most Baidu PPC customers already on the new system anyway?

A surprisingly large number of accounts haven't made the switch yet. I am still running many, many campaigns on Classic - despite Baidu advising some people months ago of the change.

This announcement though, will put a boot up the people running old campaigns and force the change.

[bill]

I read another article that added another dimension that wasn't highlighted in the article above:

Baidu Hints at Tough Times ahead [tradingmarkets.com]

Phoenix changes how Baidu delivers advertisements. The new system copies the convention established by Google, Microsoft and others, in that the search ads will be clearly distinguished from the normal, or organic, search results. Baidu had mixed the paid and organic results.

So the big impact will be the way that Baidu displays the ads? I know that the PPC was indistinguishable from the normal listings in Baidu's SERPs. Once they make it clear which listings are paid this will drive down revenue?