Apple Said to Add Baidu as IPhone Search Engine in China

Apple Inc. (AAPL) plans to add Baidu Inc. (BIDU)’s search engine on iPhones in China, part of a push to broaden its services and user base in the world’s most-populous nation, according to two people with knowledge of the matter.

The agreement to add Baidu, China’s largest search engine, to the lineup of Web tools on the iPhone could be announced as early as next week, said one of the people, who asked not to be identified because the plans are private. Apple is holding its annual developers conference in San Francisco starting June 11.

A deal with Baidu, which handles about 80 percent of China’s Internet search queries, fits with a plan by Apple Chief Executive Officer Tim Cook to gain a bigger toehold in the largest mobile-phone market. It also gives users an alternative to Google Inc., which competes with Apple in mobile software and advertising.

“This is definitely going to help Baidu,” said Joshua Maa, chief executive officer at Madhouse Inc., an advertising company in Shanghai that specializes in marketing on mobile devices. The deal will boost Baidu’s wireless advertising business, he said.

Baidu rose 8.9 percent to $123 at the close in Singapore trading, the biggest percentage increase Dec. 2. The company’s American depositary receipts climbed 2.8 percent to $122.46 at the close in New York. Apple increased 0.1 percent to $571.72.

The Chinese company is working to add users who access the Internet on smartphones such as the iPhone, after dominating the search-engine market for personal computers in China.

‘Lot More Opportunity’

Baidu accounted for 78.5 percent of China’s search-engine market by revenue in the first quarter, compared with 16.6 percent for Google (GOOG), according to research company Analysys International.

China’s growing middle class has more income to spend on smartphones and is becoming a more alluring audience for advertisers. China accounted for 20 percent of Apple’s sales last quarter and Cook has said there’s “a lot more opportunity” there as the company rolls out new products and adds new distributors of the iPhone.

While customers will have the option to select Baidu as their main vehicle for searching the Web, Google’s product will probably remain the default choice, one person said. At present, users of iPhones and iPads in China can access Baidu search by downloading it separately as an application.

Google Products

Even so, adding Baidu is the latest example of Apple diminishing its dependence on Google’s products. Apple plans to unveil a mapping application next week that will come pre- installed on its iPhones and iPad tablets, replacing Google Maps, said a person with knowledge of the matter who isn’t authorized to speak publicly about it.

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment. Kaiser Kuo, a spokesman for Beijing- based Baidu, also declined to comment. Taj Meadows, a Google spokesman in Tokyo, couldn’t immediately comment on the future use of Google search by Apple customers in China.

Baidu, under billionaire Chief Executive Officer Robin Li, has benefited from Google’s decision in 2010 to no longer comply with Chinese regulations to self-censor Web content. Google’s market-share dropped after it shut its Google.cn service and began redirecting Chinese users to its site in Hong Kong.

Apple tripled revenue in China last quarter, making the Asian country its biggest market outside the U.S. In February, Apple added support for Baidu’s search-engine in its latest upgrade for the Mac operating system, along with other new features aimed at users in China.

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net

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