Baidu – Long road ahead.

The acquisition of 91 Wireless is just one of a series of acquisitions that must happen. 

• Baidu has announced that it will acquire a 91 Wireless, paying $1.9bn in total for the company.
• 91 Wireless runs two of China’s biggest application distribution platforms: 91 Assistant and HiMarket.
• These platforms also distribute PC software but the real focus is Android based gaming where 10bn applications have been downloaded to date through the two platforms.
• These will serve as a way for Baidu to substantially add to its presence in the distribution of applications on Chinese smartphones.
• This acquisition is another building block in Baidu’s strategy to become the Google of China.
• With Google out of the market, China is wide open for the local players.
• To complete this effectively Baidu must create or buy a series of assets that it can put together to create a complete ecosystem.
• At the moment the job is far from done as Radio Free Mobile’s analysis indicates that Baidu has assets that cover only 20% of Digital Life (see Mobile Software – iRobot Page 34).
• This means that if a user uses all of Baidu’s services, he will still spend 80% of his time elsewhere.
• Therefore, 80% of the available usage data and 80% of the opportunity to advertise is currently being lost.
• This needs to change if Baidu wants to see long-term growth and this is what I suspect this acquisition is all about.
• Baidu is currently missing a service for some of the key activities on smartphones such as gaming, social networking, browsing and instant messaging.
• This acquisition gives Baidu a platform from which to sell games and to give away its own applications but it does not allow it to learn much about what its users are doing.
• For this is requires the services themselves and it is here that I suspect further acquisitions will be made.
• I suspect that the endgame is a full offering of services on top of a version of Android that Baidu itself controls.
• Google has shown that rewards can be rich and I see Baidu moving quickly to carve out its space before its competitors move in.
• Its main competitor in this space is Tencent which is far more developed in terms of services but has a lot to do in terms of getting its services onto mobile devices (like Yahoo!).