We have received your feedback.Thank you for taking your time in view of your busy schedule.
Baidu in talks to acquire Joyy's China unit to solid its e-commerce business
In the past two years, live streaming has rapidly emerged in China, becoming as important an Internet cash channel as games, advertising and e-commerce. And this year's epidemic has made live streaming even more popular, and related companies have become the object that various capital pay attention to.
Baidu is in talks to acquire Joyy's China operations, which excludes international business like Bigo and Likee, reports Chinese digital media outlet Jiemian. As part of the deal, Baidu will take over live streaming app YY, including its content operations, technology and team.
Founded in 2005, YY is one of the first live streaming platforms in China. YY also owns Huya, the leading game streaming platform in China which is acquire by Tencent. Now, YY is sold to Baidu, what is the purpose of YY's move?
Fully focus on international business
In the early days of the live streaming industry, it has always been dominated by live shows, and only later did it gradually diverge into live games (such as Huya, Douyu) and live e-commerce (such as Alibaba). The live show is dominated by female anchors (most of the users are men), creating a considerable amount of revenue for the platform.
When Joyy Group went public on the Nasdaq in 2012, it mentioned in its prospectus that the YY live streaming platform had generated more than 90 million yuan in revenue, accounting for 30% of total revenue. Just three years after that, the revenue of YY's live streaming rose to 3.3 billion yuan, making it a veritable "cash cow" for Joyy group.
While the business of YY is getting bigger, its flaws are becoming apparent. The platform's revenue is too dependent on old users, while new users are less viscous and unwilling to pay.
With the rise of e-commerce live streaming in 2018 and the flow of more anchors to newly emerging live streaming platforms (such as Douyin, Kuaishou, Bilibili, Alibaba), YY live streaming further shrank. From Aurora's monitoring data in October, the average monthly DAU of YY's live streaming business in China has been as low as one million, far behind its rivals.
YY's decision to sell its live-streaming business also has a lot to do with its international business.
In recent years, YY has focused its business on overseas markets, launching overseas live streaming platforms Bigo (an overseas version of YY), Likee (a competitor of TikTok) and Hago (a social gaming platform that focuses on the US, India, the Middle East and Russia).
Joyy Group also has instant messaging software Imo in overseas markets, with more than 200 million monthly active users, and in 2019, Imo established a connection with Likee through Joyy Group. User traffic from Imo can be directly connected to Likee, which can realize platform monetization through live streaming and increase stickiness.
Spurred by the global epidemic, the number of users of Bigo and Likee surged. According to the company's financial report, in the second quarter of this year, its global average mobile monthly active users reached 460 million, an increase of 21% year-on-year, of which 91% came from overseas markets, and the proportion of domestic users has shrunk to single digits.
Among them, the monthly active users of Bigo live mobile terminal reached 29.4 million, a year-on-year increase of 41.3%. Likee mobile terminal monthly active users reached 150.3 million, an increase of 86.2% year-on-year. Hago mobile terminal monthly active users also reached 31.7 million, a year-on-year increase of 25.3%. Data from Sensor Tower, a third-party mobile application data analysis company, shows that in the first half of 2020, China's short video/live streaming APP overseas revenue rankings, Bigo live topped the list, and Likee ranked fifth, with Bigo's revenue alone reaching more than half of YY's revenue in a single quarter.
In comparison, YY's monthly active users grew only 6% year-on-year in the second quarter, but subscribers also declined 2.2% year-on-year.
According to sources close to YY co-founder and chairman David Li, the reason that sells YY to Baidu is to increase subsidies for investing its international businesses, "those international businesses that are currently not intended to be sold, is what David Li values."
It is reported that the deal is worthy $3 billion to $4 billion. It is unclear about the final purchase price, but it is certain that Baidu will give a higher purchase price, which will become the most generous acquisition in the history of Baidu.
As of Oct. 27, when U.S. stocks closed, the market capitalization of Joyy Group is only $7.2 billion - Joyy Group took less than 10% of its domestic business to realize nearly $4 billion in one fell swoop, apparently selling at a good price.
The acquisition of YY makes up Baidu's live-streaming business
For Baidu, its acquisition of YY is to strengthen its power in live-streaming business.
Baidu accounts for the largest share (market share of more than 70%) in the Chinese search engine market. But due to poor user experience, in recent years, the use rate is not improved, mobile search engine use rate is even downward trend.
The second quarter of this year's financial results show that Baidu's search business revenue was only 18.9 billion yuan, down 3% year-on-year, the company's market capitalization was only 46 billion. The declining trend of the search business, making Baidu have to find new business to retain users and speed up the flow of cash.
In addition to layout the business of iQiyi, AI and smart hardware in recent years, Baidu has also aimed at live streaming business, trying to make live rewards and live e-commerce a new revenue growth point.
From 2019 onwards, Baidu's executives have continued to emphasize the live streaming business, with all business lines also discussing the live streaming business, and the company has also set up an independent team, poaching Huya founder Gu Feng as the head of the live streaming team.
In April, Baidu announced that it would launch an e-commerce live broadcast, and the portal for live streaming has been added to its apps, such as the "Good-looking Video" app, Baidu Tieba ( an online community). However, Baidu's video business is not doing well compared to ByteDance, Alibaba, Tencent, Kuaishou and Douyin.
Although Baidu's short video (Baidu-based content platform) has a certain scale, the live streaming business is always a short board, lacking the strength and influence to train head anchors to break out; some key data of Baidu's video businessalso has a considerable gap with its rivals, such as the monthly active users, daily active users, paid users.
Nevertheless, Baidu believes that there is a lot of market space in the live streaming industry, so as long as the acquisition of a competitive platform to compensate for the existing shortcomings, rapid iteration, even if it does not become the head in the future, it will be able to achieve considerable revenue.
However, there aren't many live streaming platforms that can be acquired now. Considering that Douyu, Huyao was acquired by Penguin eSports, so YY is currently the best choice for Baidu.
As one of the earliest live streaming platforms in China, YY has rich operating experience and a complete set of processes from anchor training to user fees, which can make up for the shortcomings of Baidu's live streaming.
The acquisition boosts Baidu's valuation
It is believed that for YY, the acquisition is a major advantage.
As the Chinese live market intensifies competition and resource consolidation, those platforms that are no front-end traffic pool to improve the conversion efficiency need to find a new way out.
At present, YY's MAU reaches 40 million, while Baidu's MAU is more than 300 million, after being acquired by Baidu, YY is expected to solve the problem of front-end traffic.
Baidu vice president Ping Xiaoli revealed that after the successful spin-off of iQiyi, Baidu will launch new video products this year to increase its investment in the video market. And he also stressed that the search service is ushering in a comprehensive video scenario. The distribution of content from web links to graphics to live, Baidu aims to get through the search scene and live scene.
Therefore, some analysts believe that Baidu live is expected to build their own e-commerce concept through the acquisition, which can drive Baidu's revenue and profits, and boost its valuation before the second listing.
This is an article from WeChat official accounts BT Caijing (ID: btcjv1), written by Zi Qi, translated by Chris Yuan.