Microsoft, Baidu Duo Gets Bing into China Though Small Impact to Stock

-0.42%
Downside
421
Market
419
Trefis
MSFT: Microsoft logo
MSFT
Microsoft
Bing Baidu Partnership

Source: Bing, Baidu

Baidu (NASDAQ: BIDU), the most popular Chinese search engine with over 83% of the market, has been the dominant player in the Chinese search landscape for years. While Baidu offers quality results in the local language, it hasn’t fared well when it comes to search results in the English language. Tuesday Baidu announced a partnership with Microsoft (NASDAQ: MSFT), which opens the China market to Bing and is a rare success over Google (NASDAQ:GOOG) that left China following censorship concerns. [1] Bing will now power the English language search results on Baidu, which could help it grow its market share vs. Google and Yahoo (NASDAQ: YHOO).

Strategic Move & Muted Upside for Now

We currently have a $27 price estimate for Microsoft, which implies a 4% upside to the current market price of  near $26. This deal is largely strategic in nature so we do not expect much of an impact Microsoft’s as Bing accounts for less than 3% of the Trefis price estimate for Microsoft.

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Microsoft Gains Access to Chinese Internet Population – 470 Million Users

With the Baidu deal, Microsoft now has a chance to reach the largest Internet population in the world – 470 million users – who are increasingly beginning to use the English language search on Baidu. Bing currently powers close to 10% of all global searches with about 4% through Bing and 6% through Yahoo Search. [2] With the Baidu deal, it has a chance to increase this further. Gaining access to the Internet population in the Chinese mainland gives Bing a huge boost over Google.

See our complete analysis of Microsoft | See our complete analysis of Google

Notes:
  1. Microsoft to Partner With China’s Leading Search Engine, NY Times, July 5, 2011 []
  2. Search Engine Market Share, Hitslink, June, 2011 []