Baidu-Bing Tie Up Is A Big Win For Microsoft In China

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Google (NSDQ: GOOG) has had its ups and downs in China, and that presents a ripe opportunity for its competitors, both in China and closer to home in the U.S. Today, it is being reported that the Chinese search giant Baidu (NSDQ: BIDU) has signed a deal with Microsoft (NSDQ: MSFT) to power its English-language search results, serving a market that currently numbers 450 million Internet users and quickly growing.

The new relationship will apparently mean that English-language searches entered into Baidu’s engine will automatically trigger Bing results. At the moment, an English term entered into Baidu’s main search window yields results in Chinese.

A spokesperson from Baidu, speaking to Reuters, which first broke news of the deal, said that the new search relationship will launch later this year.

Baidu and Microsoft were already working together on search for mobile and in terms of optimizing page results, notes Reuters (NYSE: TRI). This extension of the relationship was first reported in May.

Before the deal is even live, some are questioning whether there is a place for English-language results on Baidu’s site. “I don’t see a lot English keywords going through Baidu. It goes through Google,” Wallace Cheung, a Hong Kong-based analyst at Credit Suisse told Reuters.

But even if that is the only traffic that comes out of the relationship, that would be a boost to Baidu in its bid to completely corner the Chinese market. After Google exited China last year over a censorship controversy, Baidu’s already dominant place in Chinese search grew even stronger, and now stands at over 75 percent, while Google has 20 percent. Microsoft’s share is negligible, according to figures from Analysys International.

Mobile implications: What will be interesting to see is how and if this relationship gets played out on the mobile front. Microsoft has announced Chinese language support for its newest release of Windows Phone 7, dubbed “Mango,” which will give it a first stab at getting some Chinese market share, and will be crucial for Nokia (NYSE: NOK) as it builds out its Windows Phone-based smartphone portfolio and seeks to keep its already strong position in that market in the process.

But in a market where mobile internet access can be more common than fixed internet access, it should come as no surprise that Baidu is reportedly also working on its own mobile operating system. Will that OS be linked up with Microsoft, too, or will it present a competitive impasse to what now looks like a very cozy relationship?

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