Chinese Internet Giant, Baidu has signed a Memorandum of Understanding to fully acquire 91 Wireless (NetDragon’s subsidiary) for a total of US$1.9bn in cash. According to the agreement: 1) Baidu will purchase NetDragon’s 57.41% equity interest in 91 Wireless for US$1.09bn (~HK$8.46bn). 2) Baidu also agreed to purchase the remaining shares from other shareholders of 91 Wireless if they are willing to sell on the same terms.
Launched in 2007, 91 Wireless operates one the leading mobile app distribution platforms in China and has attracted over 10bn application downloads to date. According to iResearch (2011-12), 91 Wireless is the No.1 third-party app distribution platform in China in terms of active users and cumulative downloads.
Baidu has turned more aggressive in mobile Internet via M&As. After purchasing PPS (an online video platform with deep mobile user penetration) for US$370mn in May, the acquisition of 91 Wireless will allow Baidu to secure a critical entry point (app store) for mobile Internet users.
While undergoing transition, we observed that Baidu is making progress in mobile services: 1) Its mobile products (map, search etc.) have attracted more than 100mn daily active users, and 2) it has captured 50%+ of total mobile search traffic in China and is gaining traction from image and voice based searches. The lack of mobile-ready websites has been one of the bottlenecks for monetizing mobile search traffic. Yet Baidu stated that by the end of 2012, ~48% of the medium to large websites have offered mobile versions, vs. ~30% a year ago.