Baidu Buys PPS Online Video Business to Contend With Youku Tudou

Baidu Inc. said it’s buying PPS Net TV’s Internet video business for $370 million as the owner of China’s largest search engine competes for online viewers with Youku Tudou Inc.

Baidu will merge the business with recently acquired online video unit, making the platform China’s largest online video site by mobile user numbers and viewing time, according to an e-mailed statement from the company today.

The acquisition is part of Baidu Chairman and Chief Executive Officer Robin Li’s strategy of preferring “buy to build” as the company seeks a greater share of advertising sales in China’s online video business. Revenue is projected to increase to 16.2 billion yuan ($2.6 billion) in 2014 from 1.36 billion yuan in 2009, according to iResearch, a Shanghai-based Internet consulting company.

“If they combine PPS with iQiyi, it will help cut costs,” said Zhang Xi, a Beijing-based analyst at iResearch. “Revenue from online-video advertisement should have higher growth than Baidu’s traditional search business.”

Baidu acquired iQiyi last year. Li expects the site to become profitable, he said during an April 26 earnings call.

“We will continue to support iQiyi to grow, but right now it is still burning money,” Li said at the time.

Baidu spent at least $22.5 million on acquisitions last year, compared with $356 million in 2011, according to data compiled by Bloomberg. Baidu’s 2011 deals included the $306 million purchase of a controlling stake in travel site, the company’s largest deal on record.

Youku Tudou

The company had cash and equivalents of 8.73 billion yuan as of March 31, compared with 11.9 billion yuan as of Dec. 31. The shares have fallen 13 percent in New York trading this year.

Baidu’s biggest online video competitor, Youku Tudou, also hasn’t been profitable since listing on the New York Stock Exchange. Victor Koo, chairman and chief executive of Youku Tudou, said in an interview in Beijing last month that he expected mobile and original content to help boost profit growth.

Daily mobile video views exceeded 100 million by the end of last year, Youku Tudou said in February.

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