By Yang Yang
Corporation, page 29
Issue 526, July 4, 2011
Translated by Chen Ya
Original article [Chinese]
Baidu and Tencent are both competing for supremacy in the Chinese internet sector, fueling a fight to acquire successful smaller businesses. Below is a summary of some of the recent developments:
Group Purchasing or One Deal a Day Services
An insider says Tencent invested in “F tuan” (F 團), a group purchasing website, although there have been no official confirmation from Tencent and F tuan.
Baidu also invested in a group-purchasing website named Qijia (齊家網).
Travel Websites
On May 17, Baidu just announced its largest investment of $306 million in Qunar (去哪兒), a Chinese-travel-search engine.
Then on June 24, Tencent completed its $84.4 million investment in eLong (藝龍), a Chinese-internet-travel agency, resulting in a 16% ownership of eLong.
Shoes
At the end of May, Tencent invested $50 million in OkBuy (好樂買), an online shoe-selling website.
In June, Baidu teamed with Baili (百麗), a Chinese shoe maker, opening an online shoe and hat-selling website.
Diamond
On June 29, Guo Feng, the CEO of Kela Diamond Website (珂蘭鉆石網), received millions of dollars from Tencent. The figure hasn’t been disclosed, but was more than the 30 million Yuan that people assumed.
Differences in Acquisition
An insider says the Tencent and Baidu have different acquisition strategies.
Baidu depends on advertising for profit, especially from e-commerce firms, and therefore has to invest carefully.
For example, after Baidu’s investment in travel-search engine Qunar, ticket agencies and hotels begin to think that it is unnecessary to advertise both on Baidu and Qunar.
Tencent depends on its entertainment business, so there’s little conflict between its advertising clients.
What’s the purpose of Baidu’s billions investments?
Baidu invested $306 million, roughly 2 billion Yuan, on Qunar. That implies a $1 billion valuation for the company, which most analysts think is expensive.
Qunar was founded in 2005 and profits mainly from advertising, group purchases and direct selling. It has no warehouses or calling centers and allows customers to go directly to third-party ticket sellers. Gross profit can reach up to 85%.
Analysts questioned why Baidu bought Qunar rather than establishing its own travel-search engine. In response, Baidu said that wanted Qunar’s strong technology and brand and that “cloning” of other websites would be bad for the development of the industry.
