Baidu to acquire biggest app store

CHINA - Baidu Inc said it will acquire 91 Wireless Websoft Ltd, a mobile app store, for $1.9 billion (S$2.4 billion) as the search provider pursues a greater presence in the emerging mobile Internet industry.

The proposed acquisition is the most expensive deal in China's Internet history.

The largest Chinese language Internet search provider said on Tuesday it agreed to buy a 57.4 per cent stake in 91 Wireless from online gaming developer NetDragon Websoft Inc for $1.09 billion, with the remainder to be acquired from other shareholders.

Richard Li, younger son of the Hong Kong billionaire Li Ka-Shing, is a major investor in 91 Wireless. It is unclear if Li will sell his stake to Baidu.

More than 10 billion apps have been downloaded through 91 Wireless since 2007. The company claims to be the biggest third-party app distributor in China in terms of active users and accumulated downloads.

If the deal is completed, 91 Wireless' listing plan on the growth enterprise market in Hong Kong will be cancelled, according to NetDragon.

The companies will further negotiate the relevant terms before signing the definitive agreements on Aug 14.

Baidu, based in Beijing, is beefing up its mobile arm after investors claimed the money-rich Web search giant had missed opportunities to tap into the rapidly expanding mobile Internet market.

Turnover of the nation's mobile Internet market is expected to hit 300 billion yuan (S$61.4 billion) in 2014, compared with 150 billion yuan last year, research company Analysys International has estimated.

Baidu's latest acquisition was in May when the company purchased PPStream Inc's online video business for $370 million, challenging top video platforms such as Youku Tudou Inc and Sohu.com.

"Baidu does not have a clear strategy on the mobile front and the revenue is heavily reliant on advertising," said Dong Xu, an analyst from Analysys International.

Online marketing revenues for Baidu hit $958 million in the first quarter, representing more than 99 per cent of the company's total revenue.

In contrast with Baidu, the nation's other two Internet giants, Tencent Holdings Ltd and Alibaba Group Holding Ltd, are investing in various areas, including e-commerce, social media, navigation, online gaming and online financing.

"Tencent and Alibaba are revealing clearer plans in emerging businesses after internal restructuring, but I am still puzzled about Baidu's set-up," said Dong. "The company's merger deals are more like 'shots in the dark' to me."

Moreover, online searching service, Baidu's home turf since its establishment, is under constant pressure.

Although Baidu has been able to maintain its market share at about 70 per cent, runner-up Qihoo 360 Technology Co Ltd has been quickly gaining share and third-place Sogou.com has also been steadily advancing.

According to data website CNZZ, Qihoo's online searching market share jumped from 11.7 per cent at the beginning of this year to 17.2 per cent as of Monday.

Baidu's share declined nearly 2 percentage points over the same period.

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