Baidu has just announced the biggest deal in its history. China’s premier search engine plans to pay $1.9 billion for 91 Wireless, a major developer of app stores in China that has downloaded more than 10 billion apps to date.
It’s a sign of the search giant’s push towards mobility as it struggles to transcend the shift from desktops to mobile devices. Baidu’s mobile app was used by only 9 percent of China’s mobile users as of last April, according to Bloomberg data.
Baidu is used for 82 percent of the searches in China, but competes against up and coming web players such as Alibaba and Tencent for Internet dominance. Launched last August, new competitor QiHoo quickly became the second largest search engine after Baidu, and is rumored to be considering acquiring Sogou, China’s third most popular search engine. Baidu needs to diversify its product line beyond simple search.
Baidu plans to purchase the majority stake from NetDragon Websoft, which owns about 57 percent of the company. It then hopes to purchase the remaining shares from third parties under the same terms.
The deal would give Baidu control over China’s most popular app stores as it strives for a greater mobile presence.
“Baidu is not as well established in the mobile Internet space as the desktop Internet space,” Andy Yeung, an analyst at Oppenheimer & Co Inc., told Bloomberg. “It’s a complementary strategy to enhance Baidu’s status in the mobile ecosystem.”
On an analyst call last year, Baidu CEO Robin Li h expressed plans to pursue acquisitions that increase the company’s valuation. This latest deal is in step with other recent major purchases of the company. Two months ago, Baidu announced plans to acquire PPS Video for $370 million. Last November, the search engine purchased a majority stake in the video company iQiyi. The two deals made Baidu China’s largest video provider.
The size of the deal speaks to the value of China’s alternative app market. Its growth has been spurred considerably by Google’s absence in China, as Android has gain dominance in the country that has become the world’s second largest smartphone market.
Founded in 2007, 91 Wireless had been planned for an IPO on the Hong Kong Stock Exchange. Obviously, $1.9 billion makes a great reason to pull it off the auction block.