Baidu Hopes $3.6 Billion Livestreaming Deal Will Boost Its Stagnant Revenue

Seeking to break an addiction to online advertising, Baidu Inc. has hoovered up a live video giant.

The legacy search company agreed to pay $3.6 billion in cash for YY Live, the domestic livestreaming business of video-based social media platform Joyy, Baidu said in a statement Monday.

The takeover will give Baidu access to YY Live’s 4.1 million paying users, as the search engine giant struggles against runaway upstarts like TikTok-maker ByteDance. The deal, which is expected to close in the first half of 2021, will include the YY mobile app, YY.com website and PC YY.

“With the acquisition of YY Live, non-advertising will become a meaningful piece of mobile ecosystem, and our legacy business, which has been dragging our mobile ecosystem’s growth, will become an even smaller part of our business,” Baidu Chief Financial Officer Herman Yu said.

Baidu still makes much of its money from ad sales on its core search engine platform. But that business has slumped over the years as Chinese internet users have switched to self-contained smartphone mega-apps and been lured away by video.

Baidu co-founder and CEO Robin Li said the company has “built a vibrant mobile ecosystem in the past few years to enable the fast growth of our non-advertising revenues by increasing log in users, adding social engagement to our platform and expanding non-advertising offerings, including membership, live streaming and online games.”

In other words, it has been trying to find new ways to pay the bills. One company source said livestreaming too could generate direct advertising revenue. But it was also a rich source of non-advertising revenue such as that made from the widespread practice of users tipping influencers with virtual gifts — of which the site takes a cut.

It was not immediately clear how the deal would fit in with Baidu’s announcement last week that it would integrate its two smaller video units, Haokan and Quanmin, into a single department to be headed by ex-ByteDance veteran Song Jian. Baidu did not respond to questions on the subject.

According to Joyy’s latest earning report, the company’s revenue derived from the livestreaming business reached 6 billion yuan ($891 million) in the third quarter, up 40.1% year-on-year, accounting for 96% of Joyy’s total quarterly revenue.

Apart from YY Live, which mainly focuses on the domestic market, Joyy also operates TikTok-like short video app Likee, social and gaming app Hago and livestreaming app Bigo Live.

On Monday, Baidu also released its third-quarter results showing that it enjoyed growth in membership revenue of its video streaming service iQiyi and an uptick in non-online marketing revenue, even though its total quarterly revenue was basically flat from a year ago.

Contact reporters Ding Yi (yiding@caixin.com) and Flynn Murphy (flynnmurphy@caixin.com)

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