Apple announced earlier this week at the Worldwide Developers Conference that Baidu will come to the iPhone in the iOS 6 software update, but it just came to light that the Cupertino, Calif.-based Company plans to seize a portion of the China-based search engine’s advertising sales as part of the deal.
The revenue-sharing agreement with Apple follows similar accords between Baidu and manufacturers of handsets that use Google Inc. (GOOG)’s Android operating system, Wang Jing, vice president at Beijing-based Baidu, said in a phone interview today. He declined to disclose the commercial terms.
Apple said this week it will offer Baidu’s search-engine as an option for iPhone and iPad customers, and add Chinese- language support for its Siri voice technology, as the world’s most valuable company tailors its products for Chinese consumers. Baidu, which fields about 80 percent of China’s Web searches, is prepared to incur costs to add smartphone users by offering services such as music streaming for free, Wang said.
Eric Wen, who rates Baidu buy at Mirae Asset Securities, told Bloomberg that Baidu previously shared revenue with websites to encourage traffic for the search engine, while it now has a focus on sharing with smartphone manufacturers. He further estimated that Baidu distributed less than 10 percent of its generated smartphone revenue to those manufacturers.
The deal reflects Baidu’s need to invest in the mobile industry instead of computers, because more people in China are accessing the Internet through smartphones. It is worth noting that Baidu is already baked into 80 percent of Android devices.