Chinese internet giant Baidu recently made a significant announcement, revealing the cancellation of its planned acquisition of livestreaming platform YY Live. The cancellation, which was attributed in part to the company’s inability to obtain government approval, has raised questions about the influence of regulatory authorities in the Chinese market and its impact on business deals.
In 2020, Baidu, known as the country’s top search engine company, entered into an agreement to purchase JOYY Inc’s Chinese live video business YY Live for a staggering $3.6 billion. The deal was considered a strategic move to transform Baidu into a leading platform for livestreaming. By diversifying its revenue sources, the company aimed to stay competitive in the rapidly expanding livestreaming market in China.
Hurdles in Government Approval
Baidu’s decision to terminate the purchase agreement was primarily driven by the failure to obtain necessary regulatory approvals from government authorities. As of December 31, 2023, these conditions had not been met, resulting in the deal’s termination. While specific details regarding the regulatory hurdles faced by Baidu were not provided, it is clear that government approval plays a crucial role in shaping business operations in China.
Livestreaming has become a multimillion-dollar industry in China, generating substantial profits for e-commerce giants and influential content creators. With its immense popularity, livestreaming has emerged as a key platform for marketing, entertainment, and sales. Recognizing the potential of this industry, Baidu’s acquisition of YY Live was seen as a strategic move to expand its presence in this lucrative market.
Baidu has faced mounting competition from domestic rivals such as Tencent and ByteDance. Tencent, with its widely used WeChat messaging platform, and ByteDance, the company behind TikTok and its Chinese counterpart Douyin, have captured significant market share in the livestreaming industry. As a result, Baidu has been compelled to diversify its business offerings, venturing into cloud computing, autonomous driving, artificial intelligence (AI), and other sectors.
The cancellation of the acquisition deal has had a notable impact on Baidu’s prospects. Investors, unimpressed by the company’s Ernie Bot AI software, witnessed a decline in Baidu’s shares earlier in the year. Additionally, Baidu’s modest year-on-year revenue growth of 6.0 percent for the third quarter of 2023 demonstrated the challenges it continues to face amidst increased competition and failed expansion attempts.
Baidu’s decision to cancel its planned acquisition of livestreaming platform YY Live highlights the significance of government approval in shaping business deals in China. While the company’s move to diversify its revenue sources was seen as a strategic play, the regulatory hurdles it faced ultimately led to the termination of the agreement. As Baidu navigates an increasingly competitive market, it remains to be seen how it will adapt and whether its diversification efforts will yield the desired results.