Baidu buys mobile app company for $1.9B

This week, Baidu announced its biggest acquisition ($1.9B), buying 91 Wireless Websoft Ltd ($20M revenue latest quarter result), to win shares in growing of Chinese mobile market. So why did Baidu, China's Google, make this purchase? Below I will analyze the motivation from three perspectives. First Chinese internet users are moving from desktops to smartphones. There are more than 300 million mobile users - up from 200 million in Sep 2012. There are more than 500 million internet users in China, country's mobile is likely to continue to grow. Baidu's core competency is in search, more natural on the web and not on mobile. Consequently, not having mobile in Baidu's portfolio makes it vulnerable. Second mobile app market is quickly consolidating. Tencent is aggressively growing through mobile services - including app and game distribution - through popular mobile chat application - wechat. Quihoo 360 offers popular app store and mobile-security software, which can guide smartphone-user behavior. Alibaba recently acquired Sina' twitter like weibo microblog business and online mapping. Not having a mobile offering that is comparable to China internet leader is Baidu's concern. Third is product synergy. Baidu's app download search and 91 Wireless's popular HiMarket app store would make Baidu a significant player in the distribution of mobile applications in China. Coupled with the above challenges, few acquisition options on the market and late to organically developing mobile offerings, I believe that Baidu's acquisition of 91 wireless is the right decision for Baidu's future growth.