Chinese search giant Baidu has splashed a cool $1.9 billion (£1.26bn) on popular mobile app store firm 91 Wireless Websoft, in another sign of the growing value of the mobile internet.
In a brief statement, Baidu said it had signed a Memorandum of Understanding to acquire 100 per cent of 91 Wireless, a subsidiary of Hong Kong-listed mobile gaming biz NetDragon, which runs two popular app stores that it says have seen over 10 billion downloads.
Reports suggested the market reacted badly to the deal, with NetDragon shares dropping more than 20 per cent on Tuesday.
However, despite the huge outlay – the largest M&A sum ever paid by a Chinese internet firm – the acquisition does make sense for Baidu as it looks to establish a more certain foothold in the fast-growing mobile internet space.
Market watcher Forrester is predicting China’s mobile internet population will reach 600 million by 2016, but commentators told The Reg recently that the country’s largest search company still lacks a coherent mobile strategy.
Even CEO Robin Li admitted in October last year that “there will be a transition period lasting a couple of years before the mobile monetisation gap will close”.
Forrester analyst Wang Xiaofeng argued that the firm had to make a bold move given web counterpart Alibaba’s investment in micro-blogging firm Sina Weibo and acquisition of mapping giant Autonavi, and Tencent’s growing success with Whatsapp-like service WeChat.
91 Wireless will act as a “powerful distribution channel” for Baidu apps, she added.
“Mobile internet is unlike the PC-based internet. For the latter, the search engine is the key channel to drive traffic, and Baidu is the dominant search engine in China, but for the mobile internet, users can find information via a browser-based search engine or through myriad discrete apps,” Wang explained.
“Thus, the strength Baidu has online won't necessarily translate to mobile. The investment on 91 Wireless will help Baidu greatly for competing with Ali and Tencent.” ®