China’s online hunt personality Baidu Baidu’s proclamation currently of plans to buy wireless app store 91 Wireless Websoft for $1.9 billion has set off conjecture about where the recent wave of mergers and acquisitions among the country’s largest Internet companies will be streamer next.
To learn some-more about a purchase and what it means, we exchanged currently with Weiru Chen, an associate highbrow of devise during a China Europe International Business School and author of a new book, “Platform Strategy: Business Model in Revolution.” Excerpts follow.
Q. What in your perspective is behind this new merger by Baidu?
A. First, it is to secure a trade from mobile phone users. Tencent’s WeChat has gained 400 million mobile users, while Alibaba has invested in Weibo, AutoNavi and several other renouned mobile applications. Baidu is descending behind in sketch trade from smartphone users. Besides Baidu Maps, Baidu has really singular applications that attract estimable trade from smartphone users. The merger of 91 Wireless, China’s second largest mobile focus placement platform, will assistance Baidu to secure a rival position in a mobile space.
Second, 91 Wireless is a mature height that connected 93,000 focus developers in 2012. These focus developers can assistance Baidu to boost use knowledge in mobile applications. The merger of 91 Wireless could assistance Baidu to build a mobile ecosystem faster than building within.
Third, this merger is also a defensive movement by Baidu. Baidu’s core business, search, is confronting foe from Qihoo, whose mobile focus placement height is a marketplace leader. By relocating into Qihoo’s territory, Baidu is means to urge opposite Qihoo’s expansion in removing mobile traffic.
Q. What does heightened foe among Baidu and a other Internet giants indicate for their distinction margins?
A. Consumers are spending some-more time on their mobile phones and reduction on their PCs. Baidu has prolonged relied on Internet hunt for around 98% of a revenue. But a tiny shade distance of a mobile does not yield a really gratifying hunt knowledge for consumers, that negatively impacts Baidu’s revenues. In a mobile space, Tencent has disrupted a possess PC present messaging use QQ with a possess WeChat mobile present messaging service. Alibaba has not nonetheless seen a clever mobile commerce height competitor. But among a foe in search, Qihoo has been a clever aspirant of Baidu’s in a mobile space. In addition, there are increasingly new applications appearing, such as plcae formed amicable networking, maps, web browsers, and app stores. All of these take mobile trade divided from search, that was a categorical entrance indicate for consumers during a PC Internet era.
Q. NetDragon’s batch was beaten in Hong Kong currently after word it would sell a infancy interest in 91 Wireless to Baidu. Why do we consider investors see this finale so badly for NetDragon?
A. NetDragon designed to spinoff a 91 Wireless resources with a inventory on a HongKong batch exchange, though this merger cancelled that plan. The investors competence consider they can get some-more from an IPO than a sale to Baidu.
Q. What does a flourishing business range of China’s vast Internet companies indicate for entrance barriers for entrepreneurs looking during desktop or wireless businesses?
A. Baidu, Alibaba and Tencent have widespread positions in both a PC and mobile areas. They all have their possess money cows — search, e-commerce, and games– and can decorate other tiny businesses easily. These giants have advantages in brand, cash, and experience. New ventures need to pierce faster into rising applications, and rise disruptive business models to be means to survive. But, offered to one of a vast giants competence also be a good choice for these entrepreneurs, if a understanding is vast enough.
Q. Do we design to see some-more MA involving China’s biggest Internet companies in a future? If so, in what forms of businesses and services? To what border to we consider it will brief over into a general area anytime soon?
A. we trust there will continue to be MA activity in a mobile Internet field, since a mobile Internet domain is still not clearly determined yet, and new business models on mobile platforms are combining and evolving. In several cases, a capability compulsory for building a mobile business is different, even paradoxical to a capability a vast Internet companies have. So when it becomes clear that a vast Internet companies can’t grow a mobile business from within, they buy a comparatively mature one from outside.
In terms of abroad MA, we notice Chinese Internet companies have started to deposit globally or find abroad partners, for instance Tencent invested almost on FAB and KakaoTalk, and Qihoo 360 built a partnership with Line. But a Internet business is a really culturally embedded business. It is as formidable for Chinese companies to go abroad is as it is for western companies to enter China.
– Follow me on Twitter @rflannerychina
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