Baidu buys Chinese appstore for $1.9B

[UPDATE] China's leading search engine will pay US$1.9 billion to buy acquire 91 Wireless in a move analysts say will bolster Baidu's foothold in the Chinese mobile market.

[UPDATE] Baidu has announced plans to acquire Chinese appstore 91 Wireless for US$1.9 billion, marking its biggest purchase to date and a move industry analysts say will boost its foothold in the mobile market.

Baidu says appstores are important "entry point" to mobile Internet.

In a statement released Tuesday, the Chinese leading search engine said it had agreed to purchase the 57.41 percent stake owned by Chinese game developer  NetDragon Websoft , as well as all remaining equity interests from other shareholders of 91 Wireless. Established in 2007, the appstore is the top third-party app distribution platform in China based on active users as well as downloads, the company said, citing 2011-2012 stats from iResearch. 

The move would help boost Baidu's gameplay in China's mobile market, according to market watchers. In an e-mail to ZDNet, Forrester Research's Beijing-based analyst Wang Xiaofeng described the acquisition as a "smart move" as it will help assure Baidu's competitiveness in the age of mobile Internet.

She said China's mobile Internet population will reach 600 million by 2016, and 91 Wireless' strength in mobile apps will be a great complement to Baidu's current business. "It will act as a powerful distribution channel for Baidu's own apps," Wang said. 

She explained that mobile Internet was unlike PC-based Internet. "[On desktops], search engine is the key channel to drive traffic, and Baidu is the dominant search engine in China. For mobile Internet, users can find information via a browser-based search engine or through a myriad of discrete apps.

"Thus, the strength Baidu has online won't necessarily translate to mobile. The investment on 91 Wireless will help Baidu greatly for competing with Ali and Tencent," she noted. 

Elinor Leung, a Hong Kong-based analyst with CLSA, said in a report by Reuters, the acquisition would allow the company to work more closely with apps developers and further improve its search capabilities. 

Citing Andy Yeung, an analyst at Oppenheimer & Co, a Bloomberg report said: "Baidu is not as well established in the mobile Internet space as the desktop Internet space. It's a complementary strategy to enhance Baidu's status in the mobile ecosystem."

Kaiser Kuo, a Beijing-based spokesperson for Baidu, said in the report: "Mobile appstores are an important entry point to the mobile Internet and are, therefore, of great strategic interest to Baidu." 

According to figures from China Internet Network Information Center, there were over 420 million mobile Web users in the country as of end-December 2012, up 64.4 million from 2011. Among all Internet users in China, 74.5 percent accessed the Web via their mobile phones in 2012 compared to 69.3 percent in the year before.