CocoaChina on the gaming significance of Baidu's $1.9 billion acquisition of 91 Wireless
Shaking up Chinese app distribution
We all know China matters in terms of the global economy.
It's a similar story when it comes to the app ecosystem too.
And that's why Baidu's proposed deal to acquire 91 Wireless for $1.9 billion is generating a lot of interest.
"Once the transaction goes through, this will be the largest Technology, Media and Telecom acquisition in China (exceeding the Yahoo/Alibaba acquisition)," explains Lei Zhang of Chinese developer, publisher and tools company CocoaChina.
"It's a strong validation of the booming mobile internet market in China - which is mainly driven by mobile games - for both the industry, investment community and financial sector."
Digging into the detail and it's clear that it's driven by specific local concerns.
Baidu, which because of its search heritage is often called China's Google, is desperate to get a stronger foothold in mobile distribution in China.
91 Wireless runs various app distribution platforms for Android content, which between them make it the top third-party distribution platform in China in terms of active users and downloads.
Remember, Google Play isn't legal in China, which has over 200 Android app stores.
That's the reason Baidu values 91 Wireless so highly.
"The acquisition will make Baidu a more viable competitor to Tencent (which runs Mobile QQ and WeChat) and 360 (another large third-party Android app store)," Zhang says.
The acquisition isn't without its issues, though.
For one thing, in financial terms it's a large deal, accounting for around 50 percent of Baidu's cash reserves.
Another problem to be addressed is that 91.com (one of 91 Wireless' sites) is well known for the amount of pirated content it hosts.
And there's also the issue of corporate culture.
"Baidu is more engineering-driven and its management style is more conservative, whereas 91 is operations-driven," comments Zhang.
"It has been very aggressive in terms of growth and has demonstrated a willingness to take risks. It will be interesting to see how these very different styles work out."
A new player
The final part of the puzzle concerns NetDragon.
For the deal to complete, the mobile games developer will sell its 57.41 percent equity stake in 91 Wireless, potentially rewarding it with just over $1 billion.
"As a publishing partner, we certainly hope it will invest more into content creation and create more high quality mobile games," Zhang says.
So as Chinese game developers look to expand globally and international companies took to find success in the Chinese app market, both sides of this deal will need demonstrate its significant in the coming months.
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