Shenma Mascot

Shenma Mascot — Shenma literally means horse God.

The CEO of UCWeb, the leading Chinese mobile browser and mobile service provider, said today at GIMC conference that the penetration rate of Shenma, SM.cn, in China’s mobile search market has reached 20%.

It’s only one week after the announcement of the mobile search company which was jointly established with Alibaba Group. (Update: Alibaba had had 66% stake in UCWeb when Shenma mobile search was launched, according to its IPO filing.)

It’s not a miracle but yesterday once more. Though it’s unknown how Shenma determined market penetration, it doesn’t seem very surprising to many Chinese industry insiders.

In 2012, several days after Qihoo 360 launched its Web search engine, the company claimed it had become the second largest search service in China with some 10% market share.

It wasn’t miracle, either. In the same way with UCWeb, the little trick Qihoo played was dumping the third-party search options previously available on its own web browsers. It is widely known that Qihoo has succeeded in monetizing its huge user base of its free Internet security service by converting them into web browser users so that it would be able to make money from display advertising, channeling users to third-party web games, and, most recently, search marketing.

Before Qihoo dumped third-party search services, search referral accounted for 12% of its total revenues in Q1 2012 — one quarter before the launch of its own search service So.cn.

Similarly UCWeb had a considerable percentage of revenues coming from search marketing through Baidu, (for now) China’s largest search service and the default search option on UCWeb’s mobile browser before being replaced by Shenma last week.

Back in 2007 UCWeb chose Baidu over Google on search advertising, one of the first revenue sources of its free mobile browser. Yu Yongfu, CEO of UCWeb, was a frequent speaker at Baidu’s annual event for partners of its ad program. Each time Mr. Yu addressed that the Baidu search box within UC mobile browser was an important revenue source to the company.

As mobile has been catching up to the PC-based Web in terms of traffic, Baidu would later find a large percentage of its mobile traffic was from UC browser — It’s 35% in mid-2012, as UCWeb disclosed then (in Chinese). From time to time the rumor that Baidu was in talks to acquire or take a controlling stake in UCWeb would emerge. The latest one is UCWeb rejected Baidu for the former wanted independence.

UCWeb would then, as everyone knows now, introduce funding from Alibaba Group and jointly establish a mobile search company to fight head-to-head with Baidu. Before the founding of Shenma, UCWeb launched a PC browser, which is contradicting to its long-time mobile-only strategy. One speculation is, since it’s backed by Alibaba, it’s part of the strategies by the Chinese e-commerce giant to fight against other big Chinese tech companies like Qihoo — a considerable percentage of advertising revenue generated on Qihoo web browsers  is from e-commerce.

But what’s true is mobile browser, as I’ve argued, cannot be as important as PC-based web browser  in terms of usage and revenue generation. That’s also why UCWeb needs an independent mobile search — a mobile search service can be everywhere within a smartphone or triggered with one gesture while opening a browser for searches must be much less frequent an action on mobile phones than on PC desktops.

Now everyone, UCWeb, Qihoo, Sogou and the like, is Baidu’s direct competitor in mobile search. It is believed by many that it’s very likely that Baidu will be pulled down as more and more search traffic is from mobile, for it’s not well-positioned in the mobile market and mobile search will evolve to be very different from the PC-based one.

If that UCWeb rejected Baidu’s offer was true, Baidu’s next target turned out to be 91 Wireless, one of the largest mobile app distributors in China, in order to avoid falling behind in mobile. But 91 can only help with app search while in-app content cannot be indexed by traditional search services.

To solve that, Google and a few others, including Chinese mobile search Wandoujia, are asking developers to make their in-app content searchable by their services. Baidu is in a slightly different way that ask developers to build webapps, which was called Light App by the company, for their native apps. UCWeb, when it was still Baidu’s pal, announced they were advocates of Baidu’s Light App movement. Now let’s see where UCWeb will head for.