- Microsoft announced a new partnership with Chinese Internet giant Baidu.
- Microsoft also established partnerships with politically connected Chinese companies and institutions, and hosted Chinese President Xi Jinping at its Redmond campus.
- Baidu will become the default homepage and search for the Microsoft Edge browser in Windows 10, which will strengthen Baidu's dominant position in search in China.
- Baidu will promote Windows 10 to hundreds of millions of Chinese users.
- Other partnerships will help Microsoft to enter government institutions and state-owned enterprises.
The Microsoft Baidu Deal
Microsoft partnered with Baidu, China's Internet giant, to make Baidu (NASDAQ:BIDU) the default search engine and home page for users of the new Microsoft Edge browser in China. Microsoft (NASDAQ:MSFT) also established partnership with politically connected Chinese companies and institutions.
"Today, we’re excited to announce another partnership with a leader in China - Baidu," says the Microsoft announcement. "With over 600 million active users, Baidu is one of the most frequently used Internet gateways in China. Together, we will make it easy for Baidu customers to upgrade to Windows 10 and we will deliver a custom experience for customers in China, providing local browsing and search experiences. Baidu.com will become the default homepage and search for the Microsoft Edge browser in Windows 10."
Officially released on July 2015, Edge replaced Internet Explorer as the default browser on Windows 10. The value of the Baidu deal for Microsoft is that it will help Microsoft capture more Windows 10 users in China. In exchange for the search placement, Baidu will make it easier for its own customers to update to Windows 10. Chinese Windows users - including hundreds of millions of users who run old or pirated version of Microsoft's operating system - will be able to upgrade to an official version of Windows 10 through Baidu's "Windows 10 Express" distribution channel.
The value of the deal for Baidu is that it will strengthen its dominant position in online search in China. According to the China Internet Network Information Center, more than 92 percent of Internet users in China use Baidu for search. Google, with 27 percent, is ranked fourth, while Microsoft’s search engine Bing is used by less than 2 percent of Chinese users.
Baidu will replace Bing as default search engine for Windows 10 users. The market share for Bing in China is so low that it makes much more sense for Microsoft to drop Bing for Baidu search, if that can help achieving more penetration of the Windows 10 operating system in the Chinese market.
"If Google can’t win the search market in China, then Microsoft can't," said Danny Sullivan, founding editor of website Search Engine Land. "But there’s a lot to gain by pushing the Windows adoption."
Besides the Baidu deal, Microsoft signed agreements with other leading companies and government institutions in China. Microsoft will collaborate with Unisplendour Corporation and 21Vianet (NASDAQ:VNET) on cloud solutions for Chinese businesses, especially state-owned enterprise customers, and smartphone company Xiaomi will adopt Windows Azure for cloud services. Shanghai Oriental Pearl Media Company will adopt Office 365 operated by 21Vianet. Microsoft also signed deals with Sichuan Provincial Government and Xi’xian New Area, a special development zone.
Microsoft and China Electronics Technology Group announced a partnership aimed at providing world-class operating system technology and services for Chinese users in specialized fields in government institutions and critical infrastructure state-owned enterprises. CETC is a large-scale state-owned high-tech enterprise group that has been leading China’s IT innovation for decades.
The Wall Street Journal observes that Microsoft is targeting politically connected Chinese partners, which indicates an effort to open doors to official business in the vast China technology market. Microsoft hosted Chinese President Xi Jinping, First Lady Peng Liyuan and a high-level Chinese delegation on Wednesday at its Redmond campus. Xi met with senior executives and board members, watched technology demos and reviewed innovative new devices.
Microsoft's vision seems crystal clear: China is a fast growing market for both consumer and government IT services, which might soon dwarf Western markets, and Microsoft wants to own a big slices of it. If Microsoft's China push is successful, Microsoft's stock will soar sky high.