Baidu, the Chinese-language internet search provider, announced its decision to invest 20 billion yuan or $3.2 billion in Nuomi, its group-buying e-commerce platform.
Last year, Baidu became the sole owner of Nuomi after acquiring all of the remaining shares it did not yet own from RenRen, a social media company.
Baidu to expand Nuomi’s O2O platform
According to Baidu CEO Robin Li, the planned $3.2 billion investment for Nuomi will be spread over the next three years. The investment is intended for the expansion of Nuomi’s online-to-offline platform under the strategy called “Membership Plus.” O2O e-commerce turns online services into offline business opportunities.
Under the Membership Plus strategy, Naidu aims to help merchants attract consumers by developing their marketing platform. The membership system of Nuomi will be integrated into the point-of-sale systems of the merchants, which allow users to pay products using prepaid cards linked to the app.
According to Baidu, the merchants and Nuomi would offer discounts to VIP customers who would spend a certain amount of money on products.
Baidu has 50 billion renminbi in cash
Commenting on Baidu’s planned investment for Nuomi, Li emphasized that the company has significant amount of cash on its balance sheet.,
“I took a look yesterday, and right now Baidu has over 50 billion renminbi in cash on its books “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,” said Li.
Nuomi has a business operation in more than 330 cities in China. Baidu aims to expand its group-buying e-commerce platform in all of the urban centers in the country by the end of 2015. Currently, Nuomi has 650,000 online stores. Its monthly turnover is 2 billion yuan.
Baidu’s competitor, Tencent Holdings is also planning to expand its business in the O2O industry. Last June, the company acquired 19.9% stake in 58.com, a Chine online classified site for $736 million.
Tencent’s mobile messaging app, WeChat allows users to order food, book for taxis and shop online. WeChat is very popular in mainland China.
iResearch estimated that the O2O industry in China will expand to 309 billion yuan.