Baidu to buy Chinese livestreaming giant in big social foray

Baidu Inc. agreed to buy Joyy Inc.’s livestreaming business for China, a deal that will mark the search engine giant’s biggest foray into the fastest-growing arena of digital video.

Once the runaway leader in desktop search, Baidu is trying to adapt its business to the mobile era but losing ground piecemeal to rivals such as ByteDance Ltd. By taking over Joyy’s YY streaming network, Baidu gets ahold of a $1.8 billion business with 4 million paying users who splurge on virtual gifts to tip their favorite performers. Joyy will keep the operations of its other video and streaming platforms for users outside China.

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The YY deal could help Baidu catch up in the heated arena of online entertainment. To compete for users and advertisers, Baidu’s core search app is morphing into a platform hosting a wide array of content from articles to videos and livestreaming, not unlike Tencent Holdings Ltd.’s WeChat. Its Netflix-style iQiyi Inc. is also going head-to-head with services run by Tencent and Alibaba Group Holding Ltd.

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Competition aside, China’s attempt to rein in its most powerful private-sector companies remains a source of concern to investors. The country’s antitrust watchdog last week unveiled a raft of regulations to root out monopolistic practices in internet sectors including search and e-commerce. Baidu -- which operates in a country where Google search doesn’t exist -- has repeatedly run afoul of regulators for promoting content deemed problematic.

Baidu forecast sales of 28.6 billion yuan ($4.2 billion) to 31.3 billion yuan for the December quarter, compared with estimates for 29 billion yuan. Revenue was little changed at 28.2 billion yuan in the three months ended September, versus an average forecast for 27.5 billion yuan.

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Started in 2005 as a chat tool for gamers, YY was among the pioneers of a way to monetize livestreaming by taking a cut of virtual gifts bestowed by fans. In 2014, its parent launched Twitch-style Huya Inc. using the same model. That unit was later spun off and is now in the middle of merging with DouYu International Holdings Ltd. to create a $10 billion game-streaming giant controlled by Tencent.

Baidu has over the past years expanded its investment into content needed to attract and keep users, backing social media platforms including Q&A site Zhihu. Longer term, the 20-year-old company is investing in artificial intelligence technology and betting on commercializing AI through smart speakers and self-driving cars. In September, its smart speaker unit received its first independent financing round at a valuation of $2.9 billion.