China's leading search engine is teaming up with the world's largest software company to beef up its English-language queries.
The deal makes sense in theory. Baidu is the undisputed champ of Chinese-language search, accounting for more than three quarters of the country's search traffic. Expanding into Japan -- home to another character-driven language -- a few years ago hasn't been easy. It will probably take even longer before it masters Western searches.
Baidu still needs to be careful here. As a hometown fave, Baidu's decision to lean on Bing for English searches will validate the foreign provider. We all saw what happened when Yahoo! turned to a then-upstart Google (Nasdaq: GOOG ) to fuel its searches a decade ago. Yahoo! dumped Big G as its search technology in 2004, but the damage was already done. The Google brand had arrived.
Microsoft has been opportunistic lately, offering up billions to power Yahoo!'s searches and Nokia's (Nasdaq: NOK ) smartphones. However, both of those companies were grappling with meandering market share and uninspiring top-line growth. Baidu is on top of the world. Revenue and earnings soared 88% and 123%, respectively, in its latest quarter. It has blown past Wall Street's quarterly profit targets with ease over the past two years. It also doesn't need the money, though the financial details of this arrangement are not being disclosed.
In short, Baidu has more to lose than gain here. In the eyes of China, Bing will become the search engine of choice for English queries. This may dent Google's fading market share at first, but won't it ultimately build up Bing as Baidu's biggest threat as Microsoft beefs up its Chinese-language search?
Be careful with Mr. Softy, Baidu. History hasn't been kind to the outsourcers in this space.
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