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Planet China 1 Talking Point 6 Week in 60 Seconds 7 Telecoms Week in China 8 Banking and Finance 9 Economy 11 China and the World 13 Shipping 14 Society and Culture 27 November 2015 19 And Finally Issue 305 20 The Back Page www.weekinchina.com Clash of the internet kingdoms m o c . n i e t s p e a t i n e b . w w w In a flurry of recent dealmaking Baidu’s Robin Li looks to make up ground on bigger rivals Brought to you by Week in China Talking Point 27 November 2015 Searching for answers A new era as Baidu enters banking with Citic and insurance with Allianz? In the spotlight: Baidu’s founder Robin Li is looking to catch up with rivals Alibaba and Tencent hen Forbes ranked China’s The rivalry between the BAT trio – acquisitions and dealmaking. But Wrichest tycoons a year ago, which are seeking to dominate after its unexpected coup last the top three slots were taken by China’s internet – is frequently com - week – in linking itself to a major the founders of Baidu, Alibaba and pared to a period in the third cen - state-run bank – might Baidu re - Tencent – the internet giants tury when the states of Wei, Shu and gain the upper hand in its battles known locally by the acronym BAT. Wu battled for supremacy. The era, with Alibaba and Tencent? At that time Baidu’s chief executive known as the Three Kingdoms, was Robin Li was the second richest a particularly bloody chapter in his - A more eventful year for Baidu? man, just behind Jack Ma of Alibaba tory, characterised by battles for ter - Baidu started 2015 with a bang, in - but ahead of Tencent’s Pony Ma. ritory, deadly military innovations vesting $600 million for a stake in However, when Forbes recalculated and alliances of convenience as the Uber. The partnership allowed the its rankings last month, Li had weak combined to repel the strong. American car-hailing firm to tap fallen to sixth position, with his net Back in the present day Baidu has into Baidu Map, a service with 240 worth shrinking almost a third to tended to look the weakest of the million active users a month. Li also $10.4 billion (the Ma duo retained BAT kingdoms, with its core search hoped the deal would give Baidu a their top-three status). The fall in engine business seemingly out - competitive edge in one of the Li’s fortune came despite Baidu’s ag - flanked by Alibaba’s dominance in fastest-growing segments of the gressive push for new revenues in e-commerce and Tencent’s strangle - O2O industry. P h o t o the online-to-offline (O2O) sector. hold of social media with WeChat. What followed set the tone for a S o u r c But will it begin to tick up again Possessing cash-rich and fast- year in which Li’s kingdom suffered e : I m a thanks to a new growth engine: the growing businesses, each of the a series of strategic setbacks at the g i n e C announcement last week of a joint Ma monarchs has been looking to hands of his rivals. Kuadi and Didi, h i n a venture with Citic Bank? expand their territories through the leading local taxi-hailing apps – 1 Week in China Talking Point 27 November 2015 and each separately backed by Al - ibaba and Tencent – shocked Li and many others in China’s internet world when they announced a sur - prise merger in February. Baidu’s two bigger rivals forged another unlikely O2O alliance last month with the $15 billion merger of group buying and food delivery websites Meituan – partly owned by Alibaba – and Dianping, backed by Tencent. The merged entity has an 82% market share, easily outflanking Nuomi, which Baidu bought last year. As with car-hailing, once again Alibaba and Tencent were threaten - Its name is based on a poem from the Song Dynasty ing to crowd out a market that Baidu had newly entered. (That ators – a key source of Baidu’s earn - firms. But the trend is evident that said, Alibaba is now reportedly in ings – and its Hong Kong-listed unit Baidu is dropping off from the big talks to reduce its stake in Meituan- Ali Health declared this week that it league,” suggests iHeima.com, a Dianping and grow a wholly-owned will expand its internet-based med - website focusing on investments in equivalent of its own.) ical services network, without speci - China’s tech space. “Maybe Baidu Following Baidu’s announcement fying the amount of money it is should instead be more worried of disappointing first quarter results, going to invest. about JD.com [an e-commerce plat - investors were rattled further in form which has market cap of about April by a high-profile clash between The weakest link among BAT? $40 billion].” the firm and one of its major adver - Despite the popular acronym, BAT Although it is trailing in value tisers. The Putian Health Industry has never been much of an equilat - creation, Baidu claims to be the Chamber of Commerce, which rep - eral triangle. A fairly miserable 2015 most tech-savvy of the three tech resents about 8,600 private sector has also seen Baidu’s share price suf - firms. The company has been pay - hospitals, threatened to boycott fer. As of this week its market capi - ing a lot of attention to projects Baidu’s search engine for overcharg - talisation stands at roughly $70 bil - such as visual internet search, self- ing it for online advertising (these - lion, considerably less than half of driving cars, Baidu Eye (China’s an - fees contribute about 10% of Baidu’s Tencent’s $189 billion, and some way swer to Google Glass) and Baidu annual revenue, see WiC276). further back on Alibaba, which is Brain (again inspired by Google, it “The fact Putian felt bold enough valued by investors at about $200 seems). to boycott Baidu earlier this year billion. Emulation may well be the sin - shows the company is no longer the Over the past 12 months Baidu’s cerest form of flattery, but perhaps monolith it once was,” believes tech stock has dropped more than 15%. Baidu has been trying too hard to analyst and blogger Doug Young, Tencent’s shares, which trade in make itself look like Google. And it adding that Baidu is struggling to Hong Kong, have climbed more is also tackling the same problem maintain its dominance in the than 30%. Alibaba’s comparables are that its American equivalent faced search engine business. “Baidu’s for - less useful in this respect because it five years ago: how to migrate its mer control of 70% of the market only went public in New York in Oc - dominance of desktop PC searches had been reduced to about 55% by tober 2014. However, it is now about and mapping services onto smart - the end of last year while Haosou 18% above its IPO price. (And unlike phones. While Google dealt with the [run by Qihoo 360] and Sohu’s Baidu and Tencent, some of the issue by acquiring and then devel - Sogou controlled 30% and 13%, re - most promising assets in the Al - oping Android, an operating system P h o t o spectively,” Young claims. ibaba empire, such as Alipay, remain for mobile phones, Baidu hasn’t S o u r Adding to Baidu’s discomfort, Al - privately-held and unlisted.) made the same transition, lagging c e : R e ibaba has stepped up its efforts to “The BAT used to represent behind Alibaba and Tencent when it u t e r s court private-sector healthcare oper - China’s most influential internet comes to capturing offline business 3 Week in China Talking Point 27 November 2015 opportunities in the era of the mo - bile internet. Planet China Of course, WiC has reported on Strange but true stories from the new China many of the dogfights between Al - ibaba and Tencent in O2O and mo - MCMANSION MOMENT. bile (also see our focus issue The Ronald McDonald is not normally associated with Battle for China’s Internet ). But cross-Strait politics, but McDonald’s has stirred controversy with its latest Baidu seems to have spent too outlet in Hangzhou. Last week the fast food chain opened a 100-seat much time on the sidelines. McCafe in the lower storey of a villa that Chiang Kai-shek’s son Chiang “Baidu’s mobile internet strategy Ching-kuo once stayed in. Conservationists claim the villa – by the famed is streets behind Alibaba and Ten - West Lake – is a cultural heritage site and should be converted into a cent. When the latter two were tak - museum. Demos Chiang, grandson of the Generalissimo (who fled to ing on each other in bloody O2O Taiwan in 1949 having lost the civil war to Mao’s Communists), wrote on battles over car hailing services [see weibo: “I don’t understand, opening a McDonald’s in the villa. How exactly WiC226] and wealth management does that adhere to regulations on the use of cultural heritage sites?” Zhejiang University academic Zhou Fuduo agreed, telling the BBC that the products [see WiC225], Baidu was villa was a symbol of China and Taiwan’s shared history. But a spokesman simply an onlooker,” iHeima.com for the local government countered that Chiang only lived there for a month points out. in 1948. Besides, the authorities needed money to recoup the cost of maintaining the building throughout the years.
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