Baidu.com, Inc. (ADR) (BIDU), Youku Tudou Inc (ADR) (YOKU), Qihoo 360 Technology Co Ltd (QIHU): Competition Heats Up in the Chinese Internet Industry

In the short-term, the PPStream acquisition will most likely be used as a “bargaining chip” for Baidu investors to look away from its current weaknesses, and still hold on to the stock in anticipation for potential gains. It will take time for Baidu to integrate into video streaming, so the company does not need an investor panic or sellout on its hands while trying to stage a comeback.

Long-term, the landmark issue with the PPStream acquisition is Baidu’s becoming legitimate competition to rival Youku Tudou. By building from the ground up upon video offerings through its iQiyi and PPS.tv services, Baidu can pose a serious threat to the success of Youku. Online video advertisement revenue, as well as possibly paid subscriptions or promotional deals, can make a nice chunk of change for Baidu — and those dollars would not be heading into Youku Tudou Inc (ADR) (NYSE:YOKU)‘s coffers.

Another impact of Baidu.com, Inc. (ADR) (NASDAQ:BIDU)‘s acquisition will be its competitive advantage over Qihoo 360 Technology Co Ltd (NYSE:QIHU). Qihoo is a software development company well known for its antivirus computer programs. It recently jumped in to the Chinese search engine market. Baidu, on the other hand, is the established “big boy” in the search engine market. Qihoo 360 Technology Co Ltd (NYSE:QIHU) has revealed some kinks in Baidu’s armor, but, by getting PPStream, Baidu has gained a competitive advantage over Qihoo in the quest for more revenue.

The bottom line

Fortunately, by making a move to jump in to the video sharing market, Baidu seems to realize that it needs to do a better job of promoting itself to smartphone and tablet users in China. By marketing itself as a Chinese version of Google’s YouTube or potentially even a Chinese Netflix, Baidu can help gain back ground it has lost to Qihoo 360 Technology Co Ltd (NYSE:QIHU) and curtail the growth of Youku Tudou Inc (ADR) (NYSE:YOKU). Short-term, this move is a Band-aid diversion for Baidu and its shareholders. But long-term, this acquisition might bear fruit for Baidu and be the bane of both Qihoo 360 Technology Co Ltd (NYSE:QIHU) and Youku Tudou.

The article Competition Heats Up in the Chinese Internet Industry originally appeared on Fool.com and is written by Evan Buck.

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