Well, the rumors are true. Chinese search company Baidu (NASDAQ:BIDU) announced today that it has acquired PPS.tv’s streaming video service for $370 million. The acquisition bolsters Baidu’s video offerings (it already owns iQiyi) and puts it in a position to challenge market leader Youku-Tudou (NYSE:YOKU) for a bigger share of China’s web video marketplace. By some user counts, this acquisition makes Baidu the proud new owner of China’s biggest video platform. (UPDATE: Unsurprisingly, representatives from Youku-Tudou dispute the claim that Baidu is now China’s largest video platform. Baidu’s official press release states that the acquisition “create[s] China’s largest online video platform” but does not cite specific numbers; however, Tech in Asia believes this claim to be based on data collected by a domestic market research firm.)
PPS.tv will continue to operate as a sub-brand of iQiyi, according to the release, but current iQiyi CEO Gong Yu will also be CEO of the new PPS sub-brand. Current PPS president Xu Weifeng and CEO Zhang Hongyu will remain onboard as co-presidents.
In a TechWeb poll from before the news became official, respondents were split on whether Baidu’s newest acquisition could help it win the video market, but the massive move to mobile is complicating the question further. Chinese net users watch billions of hours of video each month, but increasingly they’re doing it from mobile devices, and on that front Baidu’s iQiyi is already closing in on Youku-Tudou. (iQiyi claims 200 million monthly mobile users to Youku-Tudou’s 150 million daily users).
Even so, Youku-Tudou president Dele Liu says he welcomes the competition. Responding to rumors of the merger two weeks ago, Liu told reporters:
After the success and synergy created by the Youku-Tudou merger, increasing consolidation was inevitable throughout the video industry. We are happy to see this purchase go forward; we expect this acquisition will further rationalize the industry and help reduce piracy in the sector.
Nevertheless, the news poses serious questions for Youku-Tudou, and puts Baidu in a better position than ever to challenge for dominance of the streaming video market, especially on mobile devices.
UPDATE: Updated 11:38 to add “monthly” and “daily” to better clarify the Youku and iQiyi mobile numbers.