Microsoft, Baidu Partner on Search in China

Users of Chinese Internet search provider Baidu will start seeing results from Microsoft Bing in China.

The leading Chinese language Internet search provider, Baidu, and Microsoft are teaming up to provide users of Baidu with results from Bing, Microsoft's search engine, after English-language search entries are entered in China. A spokeswoman for Shanghai MSN Network Communications Technology, also known as MSN China, told The Wall Street Journal that the search results returned to Chinese users would be labeled as coming from Bing.

Baidu is looking to expand its user base after fending off market-share increases from Google, while Microsoft is trying to keep momentum going for Bing, which has seen its user base for the search service grow in the United States. "This is not good news for Google," Jake Li, who rates Baidu shares "accumulate" at Guotai Junan Securities in China, told Bloomberg News.

"More and more people here are searching for English terms," Kaiser Kuo, the company's spokesman, told The New York Times. "But Baidu hasn't done a good job. So here's a way for us to do it." Last week Baidu reported total revenues in the first quarter of 2011 were $372 million, an 88.3 percent increase from the corresponding period in 2010. The company currently expects to generate total revenues in an amount ranging from $493.3 million to $503.9 million for the second quarter of 2011, representing a 68.7 percent to 72.4 percent year-over-year increase.

"Monetization improvements combined with continuing solid traffic growth drove another great quarter for Baidu," said Robin Li, chairman and chief executive officer of Baidu. "We remain focused on enhancing our Phoenix Nest platform to improve return on investments for our existing customers and enhancing awareness of the benefits of search engine marketing among the tens of millions of SMEs and large companies in China who are not yet using our Phoenix Nest platform."

Qunar, the most widely used travel search engine in China, and Baidu recently announced an agreement under which Baidu has committed to make a $306 million strategic investment in Qunar. The investment will make Baidu the majority shareholder of Qunar. Founded in 2005, Qunar offers Chinese consumers real-time searches for air and rail tickets, hotels and tour packages.

Qunar also provides travel-related resources such as group-buying deals and user discussion forums. According to iResearch, a China-based independent research firm, Qunar ranked No. 1 among travel Websites in China as measured by daily unique visitors in March 2011. Qunar has the widest coverage of any travel search engine in China, with more than 11,000 air routes and 102,000 hotels worldwide.

The closing of the definitive agreement is subject to customary conditions. The parties currently expect that the transaction will close in the third quarter of 2011. After the investment, Qunar will continue to operate as an independent company, while both companies will cooperate in certain areas of online travel search. Baidu plans to finance the investment through obtaining a third-party loan facility.