Huatong50 and Huatong100 Index

Last Quarter, Baidu reported 16.5 million revenue from search advertising. Next quarter, Baidu expects to make about 24 to 25 million from online advertising which had surprised many investors.

The critical question is: Has the Chinese search market reached critical mass?

Baidu reports about 100 million search queris each day. Assuming 1.5% click through rate, per click cost comes in at roughly 95 cents to 1 yuan. The minimum bid on Baidu's search keyword is at 30 cents.

Baidu currently serves about 74,000 customers or only 1-2% of small and medium businesses.

If Baidu's business is close to reach the critical mass, we should be seeing an uptrend on keyword pricing right now and it should be pretty strong and similar to what happened here in the US one year ago.

So we compiled the Huatong50 and Huatong100 Index.

In Huatong50 Index, fifty keywords are included which covers many basic needs such as baby supply, furniture, shoes, TV sets, clothing, sports supply, travel, air ticket, hotel reservation, gifts, toys, etc.

The prices in Huatong50 Index are from as low as 31 cents to as high as 3.02 yuan. Each price is from the average of the top three bidders. The Huatong50 Index averaged 1.51 on its first day of collection on May 20, 2006.

The Huatong100 Index adds fifty more keywords in the more expensive categories. The prices are ranging from 3.03 yuan to as high as 20.33 yuan each. The fifty more expensive keywords covers from business opportunities, merchandizing, office supply, and office rental to golf, vacation resort, and gifts. It also covers software, computer, training and home education to visa service, foreign school admissions. Many industrial and home improvement supplies, testing instruments and large equipment are in this Index. Of course, three legal related and expensive keywords are also included.

When an expensive keyword was chosen, one qualifier is that the keyword must have at least 30 bidders.

The Huatong100 Index averaged 3.90 yuan on May 20, 2006.

The Index is fairly small and incomplete. What we hope is that at least the trend of the keyword pricing will roughly show the healthyness of Baidu's search marketing business.

The keyword pricing is very fluid and changes from weekend to weekdays, sometimes from evening to daytime especially the most expensive ones. Even with that, whenever there is a trend, it will show up.

On a last note, today(midweek), four days from the establishment of Huatong Indexes(weekend), the Huatong50 Index is up 13% and the Huatong100 Index is up a much smaller 2% due to the bigger weightings in the larger Index.

Keyword	Top bidder	Second bidder	Third bidder	Average(5/20)
1	0.32	0.31	0.30	0.31
2	0.39	0.38	0.35	0.37
3	0.46	0.44	0.44	0.45
4	0.52	0.51	0.50	0.51
5	0.64	0.49	0.49	0.54
6	0.61	0.57	0.50	0.56
7	0.64	0.63	0.62	0.63
8	1.00	0.57	0.51	0.69
9	0.76	0.75	0.73	0.75
10	0.82	0.81	0.66	0.76
11	0.80	0.79	0.78	0.79
12	1.00	0.70	0.69	0.80
13	0.82	0.81	0.81	0.81
14	0.91	0.90	0.72	0.84
15	0.86	0.85	0.84	0.85
16	0.86	0.86	0.85	0.86
17	1.00	0.85	0.84	0.90
18	1.01	1.00	0.99	1.00
19	1.03	1.02	1.00	1.02
20	1.63	1.62	0.50	1.25
21	1.50	1.40	1.05	1.32
22	3.11	0.81	0.69	1.54
23	1.54	1.54	1.53	1.54
24	1.73	1.73	1.72	1.73
25	1.86	1.86	1.86	1.86
26	2.00	1.86	1.85	1.90
27	1.93	1.92	1.90	1.92
28	2.06	2.05	1.94	2.02
29	3.00	1.57	1.56	2.04
30	2.08	2.07	2.03	2.06
31	2.10	2.06	2.05	2.07
32	2.10	2.09	2.08	2.09
33	3.20	1.54	1.53	2.09
34	2.12	2.11	2.11	2.11
35	2.21	2.13	2.12	2.15
36	2.16	2.15	2.15	2.15
37	2.44	2.12	2.06	2.21
38	2.30	2.30	2.10	2.23
39	2.27	2.26	2.21	2.25
40	2.31	2.30	2.28	2.30
41	2.43	2.42	2.39	2.41
42	2.57	2.55	2.53	2.55
43	2.59	2.58	2.56	2.58
44	2.82	2.52	2.51	2.62
45	2.85	2.55	2.52	2.64
46	3.03	3.02	2.11	2.72
47	3.00	2.88	2.61	2.83
48	4.00	2.50	2.32	2.94
49	3.02	3.01	2.80	2.94
50	3.04	3.01	3.00	3.02
51	3.16	2.97	2.96	3.03
52	7.51	0.85	0.80	3.05
53	3.12	3.12	3.11	3.12
54	3.23	3.18	3.18	3.20
55	3.38	3.37	3.32	3.36
56	3.42	3.40	3.38	3.40
57	3.41	3.40	3.39	3.40
58	3.36	3.55	3.53	3.48
59	3.51	3.50	3.48	3.50
60	3.61	3.60	3.33	3.51
61	3.54	3.53	3.52	3.53
62	3.56	3.56	3.56	3.56
63	3.60	3.58	3.56	3.58
64	7.00	2.10	2.00	3.70
65	4.03	4.02	3.95	4.00
66	4.02	4.01	4.00	4.01
67	5.00	3.99	3.12	4.04
68	4.08	4.07	4.05	4.07
69	5.01	4.08	3.62	4.24
70	4.61	4.60	3.50	4.24
71	4.58	4.57	3.66	4.27
72	4.30	4.30	4.29	4.30
73	4.41	4.40	4.39	4.40
74	4.70	4.60	4.55	4.62
75	7.11	4.32	3.00	4.81
76	5.00	4.74	4.73	4.82
77	4.99	4.98	4.97	4.98
78	5.01	5.00	4.99	5.00
79	5.25	5.25	5.24	5.25
80	5.46	5.45	5.44	5.45
81	7.52	5.00	4.84	5.79
82	6.20	6.06	6.05	6.10
83	6.22	6.21	6.21	6.21
84	6.54	6.53	6.35	6.47
85	10.01	5.12	5.11	6.75
86	10.01	5.12	5.11	6.75
87	7.07	7.07	7.00	7.05
88	10.00	6.82	6.81	7.88
89	8.55	8.53	7.01	8.03
90	15.97	5.98	5.12	9.02
91	10.00	9.10	9.08	9.39
92	9.43	9.43	9.42	9.43
93	10.01	10.00	10.00	10.00
94	10.41	10.41	10.40	10.41
95	10.50	10.50	10.30	10.43
96	11.14	11.14	11.13	11.14
97	11.50	11.10	11.10	11.23
98	13.08	11.43	11.43	11.98
99	15.00	15.00	13.18	14.39
100	20.35	20.34	20.29	20.33