Baidu Sinks $3.2B Into Online-To-Offline

Baidu, the Chinese equivalent of Google, announced yesterday (June 30) that it would invest 20 billion yuan ($3.22 billion) over the next three years in online-to-offline services, reports Reuters. The investment will include group-buying service Nuomi in which Baidu owns a 59 percent stake.

In 2013, Nuomi had 3.8 million active users and 30 percent of its sales were made through mobile devices. Currently, Nuomi is present in over 330 Chinese cities but wants to operate all across the country by the end of 2015. It has a monthly turnover of nearly 2 billion yuan.

"Right now Baidu has over fifty billion (yuan) in cash on its books," said CEO Robin Li in a press release. "We're going to take 20 billion of that and do Nuomi right."

“Going from connecting people with information to connecting people with services is a major transition,” he told TechCrunch.

The Chinese search giant wants to launch Nuomi’s own "Membership Plus" service so that merchants can use Nuomi to build their own marketing platforms and "increase user retention rates and consumption frequency." According to the South China Morning Post, the membership system will be integrated with the merchants’ point-of-sale systems, allowing users to pay for goods with prepaid cards linked to the app.

Baidu, which is in constant competition with the other two Internet Chinese giants, Alibaba and Tencent, wants a piece of the booming O2O cake. With 650,000 online stores, Nuomi’s services let users call a taxi, find deals at local restaurants and book cinema tickets through their smartphones. The group-buying service competes against Dianping and Meituan, which received $700 million from unidentified investors in January. Tencent’s WeChat allows users to order food, shop online and book taxis. In January, Tencent also invested in food-delivery startup LineO.

According to Reuters, however, analysts and industry observers say Baidu is lagging behind. In December, Uber sold a minority stake to Baidu in a cash and non-cash asset deal. Uber was meant to help Baidu gain more traffic and boost its location-based services. Uber, however, is facing a stronger player, taxi-calling app Didi Kuaidi, backed by Alibaba and Tencent.

Online-to-offline and same-day (or, in some cases, same-hour) deliveries are the next big battles in the war for eCommerce domination. According to a Barclays report, the O2O market is forecast to grow 32 percent in 2015 to 309 billion yuan ($49.8 billion).

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