Baidu’s Video Play, Qihoo’s Music 百度奇虎明争暗斗
New music and video moves by Baidu (Nasdaq: BIDU) and Qihoo 360 (NYSE: QIHU) reflect the intensifying competition between China’s dominant search engine and a fast-rising challenger, providing an interesting new form of entertainment for industry watchers. Media are reporting that Baidu has just acquired a video search and recommendation website called Jinwankansha, whose Chinese name means “What Are You Watching Tonight?” If true, the acquisition would be one of a series of recent signals that indicate Baidu is preparing to make a serious play for the online video market, potentially challenging more established players like Youku Tudou (NYSE: YOKU) and Sohu (Nasdaq: SOHU). Meantime, Qihoo 360 has also formally launched its own music service tied to its fast-rising search business, in what looks like a direct shot at rival services operated by Baidu.
Let’s start with the Baidu video news, which has media citing an unnamed “reliable source” saying Baidu has recently completed its acquisition of the team from Jinwankansha. (Chinese article) Baidu had no comment on the reports. If true, the acquisition is probably relatively small, probably costing no more than $5 million, since Jinwankansha was founded just this summer with capital from angel investors.
The acquisition would mark one of the first purchases since Baidu raised a tidy $1.5 billion earlier this month in its first-ever bond offering, as it looks for acquisitions to try to diversify beyond its core search business. (previous post) Baidu has sent other recent signals that it intends to make a serious play for the online video business, including the buyout of its partner early this month in its fledgling video service, iQiyi. (previous post) Other recent market signals have indicated that Baidu could be preparing to take a major stake in established video site Xunlei, which itself has said it wouldn’t rule out such a sale as it prepares to make a New York IPO most likely in next year’s first or second quarters.
I like the fact that Baidu is making these moves to build a comprehensive new video service that could quickly become an industry leader. But this patchwork approach it is taking, if all the reports are true, is a bit worrisome since integrating so many different assets into a single entity can be difficult.
Moving on to Qihoo, media are reporting the company has just launched its new music service, which is closely tied to its new and fast-rising search engine launched over the summer. (English article) The new service integrates searches from other music sites, and also includes a tie-up element with the music search business of Sohu’s older Sogou search engine.
But most interesting to me is that this new service only offers search and listen features. That’s quite important, because it means Qihoo won’t have to deal with piracy issues that have been a long-running problem for Baidu on its older music-sharing service. Of course, only time will tell if users embrace Qihoo’s new music service, since many may not like the fact that they can’t download songs for free. But the broader move looks like a good one, and could certainly help Qihoo gain more traffic as it makes the first serious challenge in years to Baidu’s supremacy in online search.
Bottom line: Baidu’s reported purchase of an online video search site reflects a potential big push into video, while Qihoo’s move into music services represents its latest assault on Baidu.
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