Search is big business in China, with a 470 million-strong Internet userbase. While Google has shied away from servicing China due to strict censoring laws, Microsoft (news, site) has found a partner in the country's biggest search company, Baidu (news, site).

We earlier mentioned Microsoft's involvement in China, with talks about a partnership with major search engine Baidu. The two parties have formalized the deal, which involves Bing servicing Baidu's English-language queries. This is actually an expansion of an existing partnership involving mobile content.

Baidu's spokesman Kaiser Kuo says the company is experiencing an increased demand for English searches, but is unable to adequately provide users' needs. "More and more people here are searching for English terms, but Baidu hasn't done a good job. So here's a way for us to do it."

Censored Searches?

Doing business in China is not as simple as it looks, especially for companies dealing in Internet services. Chinese law calls for heavy censorship, particularly on sensitive topics that are potentially critical of its government. While neither Microsoft nor Baidu have officially shared details of the partnership, Microsoft says it follows the local laws in jurisdictions it operates in, which means Bing searches in China are also subject to these censorship laws.

Microsoft respects and follows laws and regulations in every country where we run business. We operate in China in a manner that both respects local authority and culture and makes clear that we have differences of opinion with official content management policies."

Where Are the Opportunities?

Among technology companies, Google is one of the few voicing out its concerns against censorship in China. Short of pulling out of the country altogether, Google search is still accessible in the mainland, albeit with some limitations. The Microsoft-Baidu partnership is probably going to strike a big blow to Google, but the search giant maintains that search is but one business opportunity in this region. For instance, display and contextual advertising are one of the potential revenue earners that Google is exploring, which will involve Chinese companies buying ad placements for websites displayed outside of the country. Google says this was a US$ 1.7 billion market as of last year, and there is potential for further growth.

Looking forward, perhaps the bigger challenge here for Google is not the lost opportunity in the Chinese search business, but rather elsewhere. Chinese companies are looking into expanding internationally, such as with microblogging site Weibo, and these are capitalizing on the sheer number of users that the services have. Companies that are currently at the top of their game -- such as Google, Twitter, Facebook, Microsoft and the like -- might want to watch out. While the Chinese companies are not likely to come up with something as innovative as a new social network or search engine, these will come to big numbers that will either translate to big opportunities or big challenges.