Are Apple and Baidu About to Team Up on Google?

Just when Google wanted back in to China.

Evan Niu
Evan Niu, CFA
Mar 26, 2012 at 12:00AM
Other

There's plenty of evidence that Apple (Nasdaq: AAPL) is putting a lot of emphasis on China, and for good reason, too. CEO Tim Cook recently called it the company's "fastest growing major region by far," adding that Greater China contributed 12% of revenue in fiscal 2011, up from just 2% in fiscal 2009. That came out to more than $13 billion in sales for the year.

Apple has been working to integrate various popular Chinese Internet services into its different operating systems as a way to broaden its appeal within China. The Mac maker recently released a preview of its next major operating system, OS X 10.8, Mountain Lion, which included OS-level integration of popular services such as dominant search engine Baidu (Nasdaq: BIDU).

Source: Apple. OS X Mountain Lion Sneak Peek Features.

Popular video-sharing sites Youku (Nasdaq: YOKU) and Tudou, which happen to be trying to tie the knot, are getting similar treatment. SINA (Nasdaq: SINA) is also making the cut with integration of its Twitter-esque Weibo microblogging service.

Supporting these services might not be limited to OS X, as CNET is reporting that Apple's mobile iOS is also set to include Baidu integration as the default search engine. That would displace Google's (Nasdaq: GOOG) current default spot, which makes sense since Baidu garners a market share within the country that resembles Google's stateside claim.

Baidu's market share is estimated at 78.3% in China, dominating Google's roughly 16.7% pie slice. That's even more domination than Google enjoys here in the U.S., with recent comScore figures pegging Big G's domestic market share at 66.4%.

Considering iOS recently integrated Twitter in the U.S., I wouldn't be too surprised if SINA's Weibo eventually gets iOS integration as well.

Two years after throwing in the towel over censorship issues with the Chinese government, Google is trying to crack back in to the Chinese search market. Android has been putting up strong growth in the region, so naturally Google wants to take another shot at search.

While the iPhone's Chinese market share still lags Samsung's by a wide margin, it's bound to grow as Apple continues to expand carrier partnerships. If Baidu gets some special treatment along with expanding iPhone market share, that could be a big hurdle for Big G.

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