(Chinese Version)

While China's President Xi Jinping is meeting tech executives in Seattle on his first state visit to the U.S., Chinese tech giant Baidu is reaching a strategic collaboration with Microsoft also in Seattle. According to the deal, Baidu will replace Bing and become the default homepage and search engine on Windows 10’s Microsoft Edge browser. So here comes the question: what kind of impact will this collaboration bring on both tech giants respectively? How far will the alliance between Baidu and Microsoft go?

Different goals

1.This time, Microsoft has made a wise decision for the fact that the search engine market in China is rather stable.

This collaboration between Microsoft and Baidu seems to be a huge compromise for Microsoft since the company is literally ditching its own product Bing in the Chinese market and making place for its local rival. But in fact, it’s actually a smart move. The reality is that although Bing has been making progress in the Chinese market for the past few years, its market share hasn’t been surging at all even with the support of Windows operating systems. Bing just never caught on in China. In this case, it becomes obvious to Microsoft that it’s incredibly difficult for Bing to succeed in China, and therefore, a local alternative might be an option. What’s more, the search engine market is quite stable in China and Baidu has the most dominating search engine in the country, which is impossible for other search engines to compete with. Besides Baidu, we also have search engines like sogou.com and www.sou360.com taking up the rest of the market share, leaving no room or chances for newcomers and foreign engines to grow.

Perhaps that’s why Microsoft would want to make a decision like this, a big “compromise”. After all, Baidu is the leading company in the field of search engines in China in the aspects of business and technology. It’s very natural for Microsoft to make the decision to replace Bing with Baidu as the default homepage and search engine on Windows 10. In this way, Microsoft can provide Chinese users with better search experience, so why not? More importantly, this move can win the support of Baidu, one of the top three tech giants in China, whose help and support would definitely prove to be extremely helpful in the Chinese market. For instance, Baidu can really help promote Windows 10 services with all its resources at its disposal.

2. Baidu gets another chance of amassing a larger user base, a great add-up to its O2O blueprint

As a matter of fact, Baidu has been finding ways to integrate the company’s resources to serve its O2O plan and welcoming all kinds of potential strategic partners to collaborate with the company. For instance, Baidu had also teamed up with Uber before entering the car service market, which provided an entry point for Baidu to penetrate the mobile payment sector as well. Although Windows 10 couldn’t help Microsoft’s Bing crack open the Chinese market, it gives Baidu a chance to expand its user base by replacing Bing as the default homepage and search engine.

It’s known to all that Baidu is going through the most profound strategic transformation ever since its launch. Whether it’s investing 20 billion RMB in supporting Baidu Nuomi’s subsidy campaign, making Baidu Takeout an independent product, or reaching a strategic collaboration with Microsoft, are all moves to serve the company’s O2O blueprint. Li Yanhong has decided this year to upgrade Baidu’s current search engine business and utilize it to make a transformation, marching toward the O2O sector. In this case, the collaboration of Baidu and Microsoft is a major boost for Baidu’s O2O blueprint.

3. Applying A.I technology in local services has become a key entry point

In China, Baidu’ search engine is the dominating force which is impossible for any other search engines to compete with. However, in the O2O sector, everything is still chaotic and Baidu still needs further improvement to win over the market. The fact is that cooperating with Windows 10 will not only bring great advantages in the field of search engines, but also provide more chances to apply technologies in local services.

At the recent Baidu World Conference, Baidu announced a series of strategic products concerning the O2O sector, among which Duer was the most interesting one. In fact, Duer is pretty similar to Microsoft’s Cortana, which is also a technology based on search engine learning technology and A.I technology. Duer and Cortana can provide their users with smarter assistance in daily use. The difference here is that Cortana is based on Bing while Dumi is based on Baidu. As an important stream of the development of Internet technologies, A.I is extremely important, and therefore it’s impossible for Microsoft to give up on Cortana. In Baidu’s plan, Duer will not just be a virtual assistant, but also a new form of the future search engine, or even an entry point for users to find real life services.

How far will this alliance go?

On the one hand, even though now it’s obvious that what Baidu and Microsoft are after in this strategic collaboration, some bigger questions still remain to be answered: how far will this alliance go? And what kind of impact will it bring? What follows is the concluded three points:

a. Form a strategic alliance to face the global market. Although this alliance is based on Microsoft’s Windows 10 operating system and the alliance it intended to cater to the Chinese market, for both giants this collaboration still penetrates their global businesses. Compared to Microsoft, Baidu appears to be just a starter in the international community, but still this Chinese giant is gaining momentum fast and is constructing its own business layout globally. Baidu first poached the renowned A.I technology expert Andrew Yan-Tak Ng and set up an R&D center in Silicon Valley, and later teamed up with the leading cab-hailing service provider Uber, in which company Baidu then decided to invest. Besides Uber, one of the most innovative international heavyweights, Microsoft gradually became Baidu’s strategic partner as well. Even as early as in July this year, Baidu and Microsoft had reached an agreement, which confirmed the idea of promoting Windows 10 with the help of Baidu. As their collaboration grows more comprehensive, Microsoft and Baidu will very likely to team up to face the international market. For instance, Microsoft might help promote Baidu’s search engine in other overseas markets to form the very first international strategic alliance of the Internet industry in the U.S. and China.

b. Share technological breakthroughs on A.I technologies and accelerate the commercialization process. As a major strategic product, Cortana will naturally be one of Microsoft’s main focuses, which might be given a second shot at the market with the support of Baidu. As a matter of fact, besides promoting Windows 10, Microsoft has been undergoing some transformations in the past few years. The launch of Cortana and Xiao Bing allowed Microsoft to make its A.I technologies shine. Baidu’s technologies now also shine brightly on Baidu’s similar product, Duer. Therefore, this cooperation will allow them to share innovations on technology and have better and more effective conversation on developing new technologies. It’s highly possible for this cooperation to further stimulate the development of A.I technologies and accelerate the commercialization of such technologies. It’s fair to say that this alliance might be able to change the future industry layout in the world of the Internet in the future.

c. Together they crack open the O2O sector. At present, the O2O industry is still developing and the industry layout is unclear. However, this very industry has tremendous potential to change the Internet industry layout in China, or even the global Internet industry. Though the U.S. is years ahead of China in the field of Internet development, the O2O sector still thrives better in China instead of the American market. This O2O boom in China in a way is attributed to China’s unique Internet environment and startup scene. But we should also notice that in the ever-evolving Internet era, Chinese Internet giants all have immense strength and potential to innovate and battle in the fierce market, and that they are no longer just copycats of American giants. The reality is that Chinese giants are starting to explore and understand the local markets and local demands, which will be taken into consideration when designing and developing a new product. Aside from that, the O2O sector in China proves to be successful and worth investing in, which gives the green light for Chinese Internet giants to march toward overseas O2O markets. In this case, the collaboration of Microsoft and Baidu will very likely bring back a fair share of the O2O sector for the fact that Baidu is the leading Internet giant in China that has penetrated many aspects of people’s daily life.

Whether it’s from the perspective of long-term development or their current business strategies in the market, this Window 10 based alliance will surely help Baidu and Microsoft thrive in both the Chinese market and the global market. No matter how we look at it, it’s still a very progressive development.

[The article is published and edited with authorization from the author @Li Donglou, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.