Microsoft pegs China search market as top priority

The Microsoft logo hangs from a window during the grand opening of Microsoft's first retail store in Scottsdale, Arizona October 22, 2009.

SHANGHAI (Reuters) - China is a vital market for Microsoft's Web search business, as it chases leaders Baidu Inc and Google in the world's biggest Internet market, the world's largest software maker said.

Since launching its English-language Bing search site in June, Microsoft has been gaining steady share in the United States, with 10.3 percent in November versus 17.5 percent for Yahoo and 65.6 percent for dominant player Google, according to comScore.

Microsoft hopes to get off to a similar fast start with its Chinese-language Bing site, which is still in its beta phase following a low-key launch in June.

"Microsoft is committed to the China market and the search market in China is the most important strategic market for Microsoft," the company said on Tuesday in emailed responses to questions from Reuters.

"We specially set the search technology center in China to get a deeper understanding of what Chinese users need, to be able to deliver the best product to them."

China's Internet market is a hot spot for global search companies looking to expand overseas, but localization issues and tough domestic competition have made it tough to crack for global titans such as Yahoo, eBay and Amazon.

China is home to the world's largest Internet market by users at more than 350 million.

China's search market was worth 2 billion yuan ($293 million) in the third quarter, up 38 percent, with homegrown leader Baidu well ahead with 63.9 percent followed by Google at 31.3 percent, according to research firm Analysys International.

"Google is taking a big share of (the China market), roughly 30 percent but it is not yet threatening Baidu. Bing is still very far away," said Credit Suisse analyst Wallace Cheung.

Analysys analyst Jin Naili said users will need time to try out and get used to Bing before it has any chance of becoming a serious rival to any of the established players.

But she added that since Microsoft launched Bing's China beta version in June, the number of users who have visited the site at least three times a month has increased 30 percent as of October.

"Within one or two years, there could be large changes in China's search market," she said.

(Additional reporting by Doug Young; Editing by Chris Lewis and Anshuman Daga)