Baidu-Uber deal would be boon for both: analysts
Updated: 2014-12-15 11:59
By Jack Freifelder in New York(China Daily USA)
A reported $600 million investment from Chinese Internet giant Baidu to US-based ridesharing provider Uber could be a boon for both companies, according to analysts.
Such a cash influx from Baidu would allow Uber to expand into more Chinese cities, said Kumar Saha, senior automotive analyst with Frost & Sullivan, a global consulting firm.
"Uber is doing well in Chinese [metropolitan areas] and wants a piece of that action - with its own network and online infrastructure," Saha wrote in a Dec 12 e-mail to China Daily.
"Uber has been plagued with various legal issues in different regions and China's legal system could be a nightmare for them," he wrote. "A partnership with Baidu might act as a buffer, and Baidu has a vested interest here."
The reported deal also would allow Baidu to join the ranks of other leading Chinese Internet conglomerates that have made investments in the real-time ridesharing market, a group that includes Tencent Holdings Ltd and Alibaba Group Holding Ltd, Saha said.
Kaiser Kuo, a Beijing-based spokesman for Baidu, told Bloomberg News that the company will make an announcement about an investment with a US-based startup company on Dec 17. Kuo declined to comment further. A representative from Uber could not be reached for comment by China Daily.
Henry Guo, a senior research analyst with global investment research firm JG Capital, told China Daily that Baidu's brand awareness and the penetration of its mobile applications should also "help Uber's adoption in China".
Though both Tencent and Alibaba have already made forays into the vehicle ridesharing market, with investments in Chinese mainstays Didi Dache and Kuaidi Dache, respectively, Guo said Baidu's reported deal with Uber should yield a number of long-term opportunities in the world's largest automotive market.
Chinese state media (China National Radio) first reported the deal on Dec 12, and then a number of media outlets, including Bloomberg and Reuters followed suit.
According to the reports, Uber will get cash and a series of non-cash assets, including access to Baidu's online resources in China.
Uber, which was founded in 2009, operates a for-hire vehicle (FHV) business in more than 50 countries and close to 250 cities worldwide, including in China, where it's available in such major cities as Beijing, Shanghai and Guangzhou.
The company's mobile application uses GPS to put a customer in contact with the nearest driver, with Uber charging a commission.
Beijing-based Baidu Inc was founded in 2000 and is China's leading web and search engine service. The company has been trying to raise its international profile by moving into search markets beyond its borders and shifting focus to other research areas, such as mapping and other location-based services (LBS).
"Baidu Map is definitely a competitive edge that Uber can leverage in the future," Guo, with JG Capital, wrote in an e-mail to China Daily. "On the other hand, Uber's business model is suitable for Baidu to exploit O2O (Online to Offline) opportunities. Uber's local characteristics and Baidu's mobile strength should help generate more opportunities."
"Uber is a brand new idea that seems to be taking off," technology industry analyst Jeff Kagan wrote in an e-mail to China Daily. "Uber gets the benefit of a partner who knows their way around the Chinese market and Baidu gets to be linked with a rapidly growing company."
"However, we don't know what the marketplace will look like in five years," Kagan wrote. "Will the traditional taxi cab and limousine model change and become more like Uber, or will the traditional business stay put? That is the question on everyone's mind."
(China Daily USA 12/15/2014 page1)