Internet giant eyes leading position in group-buying sector
Baidu announced on Tuesday that it will invest 20 billion yuan ($3.2 billion) into its group-buying unit Nuomi over the next three years, in a bid to strengthen its position against major rivals in the online-to-offline (O2O) services sector.
"Right now Baidu has over 50 billion yuan in cash on its books. We're going to take 20 billion of that and do Nuomi right, because services are ultimately more important than information," Baidu's CEO Robin Li Yanhong said at a press conference in Beijing.
"The 20 billion yuan is not a small amount, and it shows Baidu's ambition to expand its business in the O2O services space," Liu Xuwei, an analyst with IT consultancy Analysys International, told the Global Times Tuesday.
The scope of O2O services, which are dominated by group buying, car hailing and food delivery deals, has expanded into on-demand door-to-door services including massage, car washing and cleaning.
China's O2O services market was valued at 235 billion yuan in 2014, according to market research firm iResearch.
Nuomi has been testing its "Membership Plus" strategy this year in two key categories - restaurants and movie tickets - by launching prepaid cards and membership cards. Users who reached certain spending levels can enjoy discounts from Nuomi and the merchants' member clubs.
"The investment will be mainly spent on connecting Nuomi's membership system with off-line merchants' systems as well as on subsidies to attract consumers," Ding Daoshi, head of Beijing-based Internet research institute sootoo.com, told the Global Times Tuesday.
According to statistics from Analysys, meituan.com dominated China's group-buying market by occupying a 57 percent share in the first quarter of this year, followed by Tencent-invested dianping.com with a 24.26 percent share and Baidu-backed Nuomi with a 9.55 percent share.
Baidu estimates that Nuomi will occupy the No.2 position in its category by the end of the year, in term of sales.
"Baidu's large user base of its search and mapping services as well as a large number of off-line businesses that advertise on its platform will serve as the growth engine for Nuomi's O2O services," Ding said.
But surpassing the market share of dianping.com will not be an easy task. Analysts expect the other two Internet giants - Alibaba Group and Tencent Holdings - to soon follow suit by increasing investment in their O2O businesses.
China's group-buying sector experienced a boom since 2010 with 5,058 group-buying websites in operation at its peak in August 2011, but fierce competition and problems such as poor services and fraud led to a large-scale shutdown in the sector. Only 176 group-buying websites were still in operation by the end of 2014, according to tuan800.com.
