Microsoft Ties Up with China's Baidu in Search Deal

Baidu dominates China's search-engine market after Google Inc. pulled out last year following a high-profile fallout with Beijing over censorship.

BEIJING -- Baidu, which has three-quarters of China's search market, signed a deal with Microsoft's Bing to offer English-language search to Baidu users, as it eyes an overseas expansion and Microsoft aims to increase its presence in the world's largest Internet market.

Baidu dominates China's search-engine market after Google Inc. pulled out last year following a high-profile fallout with Beijing over censorship.

The partnership will allow English-language input into Baidu's search box to automatically activate Bing, whose search results will be delivered to Baidu's web pages, Baidu said in an emailed statement on Monday.

Analysts said the tie-up would help Bing to gain greater access to China's more than 450 million Internet users and further dent Google's business in the country.

"The cooperation between Baidu and Microsoft will further strengthen Baidu's dominance in China's search-engine market, and will also make Google's business in China more difficult," said Dong Xu, an analyst with Analysys International.

Baidu had 76% of the Chinese search market in the first quarter of 2011, according to Analysys International data.

Bing, which censors its contents in China to be able to operate in the country, has a negligible share of the market, while Google has nearly 20 percent counting visits to its offshore sites.

The new tie-up, due to be launched this year, builds on existing cooperation between Baidu and Bing on mobile platforms and page results, said Baidu spokesman Kaiser Kuo.

Kuo said Bing was not submitting to any further censorship or restrictions on its English search as a result of the deal "than they already do."

Microsoft was not available for comment.

With web penetration hovering around 30% and lack of sophisticated users outside the big cities in China, the potential for growth in the sector is huge, analysts say.

Some analysts were however skeptical of just how much demand there would be for English search on Baidu.

"It's a good thing, but I see very minimal impact for Baidu. I don't see a lot English keywords going through Baidu. It goes through Google," said Wallace Cheung, a Hong Kong-based analyst at Credit Suisse.

It is not Baidu's first time to enter the search market overseas. It has a Japanese search service that is loss-making.

Baidu has also been diversifying from its core search business to compete in the fast-growing segments of mobile and social networking.

Baidu has hinted it is developing a mobile device operating system and recently invested $306 million to take a majority stake in travel website Qunar, as it focuses more on e-commerce. The company also has a stake in online video firm

Shares in Baidu have risen more than 48% so far this year, even after falling in June, as concerns over fraud at some Chinese companies listed overseas hit market sentiment toward Chinese companies listed in