China's Baidu expands online video business with $370 million acquisition

China's online video market is fragmented, and competition has been fierce

China's largest search engine Baidu is getting closer to becoming the country's largest online video provider with a new US$370 million acquisition.

Baidu is spending the money to buy the online video business of PPS, a popular video sharing company in China, it said Tuesday. The acquisition is expected to close in the second quarter of this year.

Following the acquisition, the online video business of PPS will be merged into Baidu's own video platform, known as iQiyi. The search giant claims this will turn iQiyi into China's largest online video platform by number of mobile users and video viewing time.

The acquisition by Baidu points to further consolidation of China's online video sector. Last year, two of the country's leading video sites, Youku and Tudou, joined forces in a major merger. The companies re-branded themselves as Youku Tudou.

The country's online video sector, however, is still fragmented and no video site yet dominates the market. Chinese censors have blocked Google's YouTube.

Baidu's acquisition is expected to help its iQiyi platform better compete with Youku Tudou. Both are licensing TV shows and movies from local and foreign production studios to attract users, but also adding to their operating costs. Last year, Youku Tudou spent $118 million on content costs.

iQiyi's CEO Gong Yu said in a statement Tuesday that the acquisition will help the video site improve user experience and content offerings. The country has over 371 million Internet users who frequent online video sites, according to the China Internet Network Information Center.

Tags business issuesInternet-based applications and servicesbaiduinternetMergers and acquisitionsvideo

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Michael Kan

IDG News Service

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