Few investors would like to invest in the first shopping search engine Yin Rujie founded in the U.S. in late 1990’s. Investors he approached back then argued that e-commerce sites wouldn’t let him index items on their sites for price comparison. Mr. Yin finally managed to raise some funding and later on founded another shopping search brand in the U.S. and his home country South Korea, and the third one for several developed countries. He sold all of the previous ones and now bets that China is the market for shopping search as e-commerce in China has become enormous.
After travel search Qunar went public on the New York Stock Exchange last month, Zhuang Chenchao, co-founder and CEO of Qunar, recently told ITTime that some 200 investors had refused to invest in Qunar since they started raising funding in 2005. (report in Chinese) Although Baidu acquired a controlling stake in 2011, prior to that Robin Li, CEO of Baidu, kept saying he didn’t believe vertical search services would work out and hadn’t seen any successful cases especially in China market. Qunar generated $81.75 million in revenue in 2012 and $58.46 million in the first half of 2013.
Those investors that passed on Qunar reasoned that, according to the report, the demand for air tickets couldn’t be big enough for a search engine even if the idea of price comparison worked. They didn’t see the online travel sector would grow so fast in China.
Mr. Yin had spent four years developing his fourth and a Chinese-language shopping search, B5M.com, before it was launched in December 2011. In all these years, e-commerce might grew even faster than online travel. Back in 2007, JD.com (formerly 360buy.com) just launched 360buy.com the site, just started expanding from Beijing, Shanghai and Guangzhou to the whole country, and raised first round of funding, according to JD Website. Now JD is a business-to-consumer e-commerce giant and conventional players like retail chain Suning or department store brand Yintai are becoming e-commerce companies.
B5M concludes that at least two years ago Chinese users did much fewer searches than users in the U.S. for 1) there were too many items shown on the homepages of Chinese e-commerce sites or send recommendations to users. And Chinese consumers don’t mind buying the same goods with others — they often like to buy trendy goods, which is a consumption behavior Mr. Yin found different from consumers countries like the U.S.. So previously Chinese users would do much more browsing than searches. 2) many e-commerce sites don’t offer good search services that users often cannot get satisfying results.
But now the situation has changed. Mr. Yin estimates that 40-50% Chinese users do searches for online shopping and the figure will reach 80%. According to research results offered by B5M, 80% of Tmall&Taobao users do searches, 40-50% JD users do and 30% Yihaodian users do.
Altough Alibaba’s Etao is a giant that can hardly be beat, B5M is confident it will have stable foothold in China’s online shopping search market. It believes it surpassed Huihui, the shopping search ran by Chinese Internet company Netease, several months ago and now is ten times bigger in terms of traffic and has indexed many more items than it, becoming the second largest shopping search in China. Less than two months ago the company announced Series B funding. B5M hopes to break even next year and go public in 2015 or 2016.
Like all other search engines, B5M makes revenues from advertising based on CPM, CPC or CPS. It’s users are mainly from first- and second- cities. Top categories of searches goods include books, apparel, cosmetics and consumer electronics. Recently B5M added a channel for online financial products. In the future it aims to become a place for users to search for all online goods, physical or virtual.
Mr. Yin had been in shopping search sector for over a decade when he decided to build a Chinese one. But to this day he thinks his previous experience only contributed 20% to B5M while 80% is about how to build a search engine in Chinese and grew the business in China market. For instance, he found acquiring traffic from the largest general search engine Baidu isn’t a good idea for it’s very expensive while many businesses in Western countries would do so with Google. He learned that there are alternative distributors from who they can buy value-for-money traffic.
As the only Korean in his company, Mr. Yin said he learned about China market from his Chinese employees. Having built the business for over 6 years, he didn’t start learning Chinese till one year ago. He doesn’t see other shopping search services competitors but all other Internet services who make revenues online.