August 27, 2013, 4:38 PM

China’s search engine giant acquires a group-buying site

Baidu’s new strategy combines its location-based tools with Groupon-like services.

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Chinese search engine giant Baidu Inc. announced last week that it will acquire a 59% stake in Nuomi.com for $160 million cash from Renren Inc., a Chinese social media company.

Founded in 2010, Nuomi Holdings Inc. is a group-buying services provider that has been wholly owned by Renren. According to Renren, in the second quarter of 2013 Nuomi sold approximately $120 million worth of goods or services on its site and had 3.8 million active customers. 30% of sales were from mobile devices.

"Nuomi's group-buying platform and high-quality local information clearly complement Baidu's existing mobile location-based services (LBS) and maps offering," says Jennifer Li, chief financial officer of Baidu. "Nuomi's broad geographical sales coverage and established consumer base will be instrumental in helping Baidu build out our LBS platform for local merchants."

The combination of a search engine with an online voucher provider could allow, for example, Baidu to offer a consumer searching for a restaurant on his mobile phone a discount offer to a local eatery. That kind of combination of e-commerce, mobile internet access and location-specific marketing is the future of the internet, says Boyang Shen, CEO of Nuomi. 

Sites that offer Groupon-like discounts to consumers are growing rapidly in China. As of the end of June 2013, there were 1,548 group-buying web sites in China. In the first half of 2013, Chinese consumers’ purchases on group-buying sites totaled 23.9 billion yuan ($3.9 billion), up 63% from a year ago, according to China E-commerce Research Center, a market research company.

Baidu is not the only Chinese Internet giant investing in the intensely competitive group-buying arena.  In 2011, Tencent Holdings Limited, provider of a popular instant-messaging service, created a joint venture with Groupon, the U.S. company that turned online group buying into an international craze, together investing $80 million in Gaopeng.com. Groupon also now sells physical products and is No. 65 in the Internet Retailer 2013 Top 500.

A provider of many Internet services, Tencent generated revenue of $23.5 billion in Q2 2013 and has 236 million users of wechat, a mobile messaging application.  In addition, China e-commerce leader Alibaba Group, No.1 in Internet Retailer’s Asia 500, lead a funding round for online group-buying site Meituan.com in 2011. The company raised a total of $50 million in that round. According to China E-commerce Research Center, Meituan’s transaction volume reached $860 million in the first six months of 2013.  

 

 

 

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