China's Baidu Makes Acquisition of Rival Online Video Platform PPS Official

Baidu H

The “Chinese Google” confirms the $370 million purchase of the Shanghai-based company's streaming video business.

HONG KONG – Baidu Inc., China’s largest internet search-engine operator, has purchased the online video business of rival internet video provider PPS for $370 million.

The announcement on Tuesday confirmed speculation that emerged last week about an impending acquisition, which would help the Beijing-based internet giant boost the business of its three-year-old online video unit iQiyi.

STORY: China's Baidu Posts First-Quarter Net Income of $328.9 Million

Baidu’s statement said PPS’s online video operations will be merged with that of iQiyi while remaining a sub-brand within the label. The deal is expected to be closed by the end of the second quarter of 2013. iQiyi at present commands 6.7 percent of the online video market, according to late 2012 estimates by the research company Analysys International.

PPS chairman Zhang Honyu and president Xu Weifeng will join iQiyi as co-presidents, the statement said, and will remain in charge of the PPS sub-brand and “new business development.”

The acquisition and merger is the latest move towards consolidation in China’s online video industry. Last year, Youku purchased its rival Tudou, and the joined entity -- Youku Tudou -- now takes up 32.4 per cent of the market, according to Analysys' figures. Sohua is ranked second with 10.9 per cent, followed by iQiyi and then Tencent (4.7 percent).

Responding to reports about the Baidu-PPS merger, Youku Tudou president Dele Liu said last week that increasing consolidation in the online video industry was “inevitable.”

STORY: Chinese Online Video Giant Youku Tudou Acquires 33 U.S. TV Series

“We are happy to see this purchase go forward, we expect this acquisition will further rationalize the industry and help reduce piracy in the sector,” he added.

Analysts have pointed to iQiyi’s struggle to compete with Youku Tudou as contributing to Baidu’s overall modest recent business performance. Speaking in an earnings call last week after the announcement of the company’s first-quarter results -- in which a $328.9 million net income was posted -- Baidu CEO Robin Li admitted the online video unit was “still burning money,” but he was confident of an upturn in its fortunes in the long term.

iQiyi CEO Gong Yu said the PPS merger will “deliver better marketing value and a wider range of options for advertisers."

“The merger of iQiyi and PPS -- both companies with strong technology DNA -- lays a solid foundation for iQiyi to become a great technology company with strong media DNA as well,” he said.

Apart from its online video operations, PPS is also involved in development of PC software and mobile apps -- areas which the company will retain independently and that are not be affected by the merger.