Baidu, China’s largest internet search engine, is having a hard time after a college student named Wei Zexi died after mistaking an advertisement on Baidu for an experimental cancer treatment for medically reliable information. Baidu was then accused of being “unethical”, failing to clearly delineate paid advertisements from search results. Months later, the Nasdaq listed company reported its worst quarterly earnings. With the increased competition from domestic players like Tencent and Alibaba and the downward pressure on online advertising, which contributes to over 90% of Baidu’s revenue, it is crucial for Baidu to diversify its business.
Live streaming in China is not new. Even back in 2005 there were live streaming businesses based on the PC, but it was not until 2014 that this industry really started to take off in the Chinese market, as China’s almost 700 million internet users became aware that mobile live-streaming is fun and can even be profitable. China’s internet giant companies have long recognized that live streaming is going to be the new portal to bring in traffic, so just like their competition in other battle fields, Baidu, Tencent and Alibaba have spread their tentacles to live streaming and mapped out their respective businesses.
In 2014 rival taxi apps Didi Dache and Kuaidi Dache engaged in a fierce price war that left onlookers stunned. According to multiple sources, Didi and Kuaidi altogether splashed over RMB 2 billion (approx. $376 million) on subsidizing customer ride fares. Yet in early 2015, the two bitter rivals announced their decision to merge. It made little sense. They couldn’t possibly have buried the hatchet that soon. Cases like Didi-Kuaidi are becoming common in China’s internet industry, spanning areas like online travel, group buying and classified advertisement websites. Why is China’s online sector witnessing a series of frenzied mergers, acquisitions and partnerships between sworn rivals?
To boost the economy and help small and medium enterprises get capital more easily, the Chinese government is encouraging non-government entities to invest in financial institutions, even allowing private companies to open their own banks. When the government announced its decision to grant five banking licenses for private banks earlier this year, the big three tech companies—Tencent, Alibaba and Baidu—jumped at the opportunity. Given the technological expertise of their backers, these online banks are able to leverage things like big data and cloud computing to assess credit worthiness and tailor the user experience. But can they outmaneuver traditional banks?
China’s internet world is ruled by three big players: Baidu, Alibaba and Tencent, collectively known as BAT. The three companies generated revenues of $20 billion in 2013 and $8.16 billion in the third quarter of 2014. The big three account for a significant, and perhaps disproportionate, share of China’s internet market. Another technology company that has risen to prominence pretty quickly is Xiaomi. BAT and Xiaomi are quickly making inroads into new areas outside their core business—by either investing in or acquiring companies. Take a look at the brand and companies that are backed by these four companies.
If there’s one activity that unites China’s subway commuters, it’s huddling over their smartphone screens to watch the latest local, South Korean or Western TV shows downloaded or streamed from one of China’s many video websites. They’re part of a wider trend where more and more consumers are heading online to find their entertainment, and government statistics show music and video are the fourth and fifth most popular uses for the internet, respectively. But for all the prodigious growth, monetizing the interest has been a different matter. That is largely due to a pervasive culture of free, on-demand content, but that may be set to change.
Can China become a global leader in the Internet of Things?
With companies like Baidu, Alibaba and Tencent branching out into new areas, China is witnessing the rise of a new breed of digital conglomerates.
Wang Jianlin’s sprawling business conglomerate, the Dalian Wanda Group, has its fingers in many pies: from real estate and retail to sports and entertainment.
As China’s tech giants expand and diversify, a new era of digital conglomerates is dawning.