Our reporter Hou Jiyong reports from Beijing

Baidu acquired PPS and integrated it with its iQIYI, making the Chinese video internet industry rise again.

On May 7, Baidu announced that it would acquire all shares of PPS video business for 370 million dollars and merge PPS video business with iQIYI. Baidu said that after the business combination between the two sides, the scale and duration of users of the whole platform will reach the first in the industry, and iQIYI will become the largest online video platform in China.

After the merger, the founder and CEO of iQIYI Gong Yu He will be the CEO of New iQiyi Company, responsible for the unified management of the new company. Zhang Hongyu and Xu Weifeng, the founders of PPS, served as co presidents and continued to be responsible for PPS related businesses and new business development of the new company. Meanwhile, PPS will remain as a sub brand of iQIYI.

Gong Yu said in an interview with our reporter: "After the merger of the two companies, they can achieve resource optimization in three aspects: first, scale effect and flow appreciation; second, industrial chain control, which has the bargaining power for both the upstream (the copyright owner) and the downstream (the advertiser); third, mobile video power, with PPS reaching 150 million users on the client side."

Gong Yu also believes that this merger is good for the industry. First, it will reduce the tragic copyright price war, and second, it will help the overall industry to make profits.

Youku Tudou Group will suffer the most. The "bipolar world" will be formed, and the pattern of "one super and many strong" will no longer exist.

For this acquisition, the chairman and CEO of Youku Tudou Group Gu Yongqiang Previously, I thought it was "a good thing". "I'm glad to see the merger of iQIYI and PPS, which shows that the scale effect of the merger of Youku and Tudou has been recognized by peers."

Gu Yongqiang believes that industry concentration is an inevitable trend, which is conducive to promoting the legalization and standardization of the video Internet industry.

Great changes in video pattern

After iQiYi merges PPS, it will be the first in two industries. First, the scale of users across the platform, and second, the length of users. Full platform user scale mainly refers to the user scale of "PC Internet+Mobile Internet".

Unlike Youku Tudou Group, which includes a large number of UGC (user shared content) and PGC (professional shared content), iQIYI has the advantage of long videos, and the length of a single user's browsing is higher than the average of peers.

After the merger, iQIYI will fill the gap in UGC. Long Yu said that this year, UGC content was launched "from a high starting point and with great efforts", because this service has a high stickiness for users and social networking features.

Gong Yu believes that the two aspects of this round of merger are complementary and synergistic. On the one hand, iQIYI has advantages in PC and PPS has advantages in mobile; Second, in terms of monetization, iQIYI has experience in brand advertising, and PPS is very successful in charging forward business; Third, with Baidu's products, such as music and post bars, PPS will bring more traffic and enhance the value of PPS content.

After this round of consolidation, PPS will make up for the lack of mobile terminals. Zhang Hongyu revealed that by the end of March, the number of PPS clients installed on all smart terminals (mobile phones+tablets) had reached 154 million, with daily activity reaching 10% and weekly activity reaching tens of millions.

Gong Yu confirmed that Baidu's acquisition of PPS only includes video business, not other businesses: PPS business includes forward charging business (video advertising) and backward charging business (game business). This round of acquisition only includes forward charging business, and the game business will cooperate with the new company after merger.

After the acquisition, the PPS game business will operate independently, not within the scope of this round of acquisition. The reporter learned that before M&A, the revenue from game business accounted for more than two-thirds of all revenue of PPS.

Because Baidu merged with PPS, China's video internet has formed a "two pole world" pattern, one is iQIYI, the other is Youku Tudou. However, this pattern is not stable, and the recent changes come from industry mergers and acquisitions.

The reporter learned that Sohu is planning to acquire PPTV. There are also rumors that the two sides are still haggling, but the partners have locked in each other. After the completion of this acquisition, "Sohu Video+PPTV" is enough to compete with "Youku+Tudou" and "Baidu+PPS".

M&A is the driving force of this pattern, but the force that dominates the pattern change will no longer be M&A. Liu Shuyao, chairman and CEO of 100TV, analyzed in an interview with our reporter: "If Sohu's acquisition of PPTV is completed, the driving force of the industry's pattern change will no longer be mergers and acquisitions, but new technologies and new business models."

Liu Shuyao believes that simply watching the PC video Internet has not changed much. The PC video Internet has not subverted the traditional TV business, and the traditional TV business will not be greatly affected in terms of revenue and users; However, mobile Internet may subvert the traditional TV business and PC business and reshape the entire video industry.

　 Intended for Internet access

There are two rumors about this acquisition. One is that the income of the acquired company exceeds a certain share, and it needs to pass the anti-monopoly review of the Ministry of Commerce; Second, the acquisition amount exceeds 400 million dollars, which needs to pass the anti trust review of the SEC. Stripping off the game business and acquiring only the video business can reduce both the valuation and the revenue.

This not only avoids the review of the Ministry of Commerce, but also avoids the review of the SEC. Gong Yu confirmed the existence of the audit rules of the Ministry of Commerce, but for the SEC's review, he said that he "did not know the existence of relevant rules".

As for Baidu's divestiture of game business and acquisition of PPS video business only, Gong Yu explained that Baidu attaches great importance to the Internet portal, whether PC Internet or mobile Internet, video has become one of the most important portals.

Gong Yu said that video services will be ubiquitous in the future, regardless of equipment and scenes.

A person in charge of China Search said in an interview with our reporter that with the development of the Internet, the search portal is too simple, and some Internet services no longer take search as the portal. In order to maintain the portal advantage, Baidu needs to control more services.

Li Yanhong therefore proposed the middle page strategy, acquiring and developing the middle page business to occupy more entrances.

Since 2010, Baidu has invested in the middle page business as follows: in March 2011, 50 million dollars were invested in housing information websites to settle customers; In December 2010, 190 million yuan was invested in Shanghai Qijia Information, a local life service provider, Eloho and Chongqing Rongdu Technology; In June 2011, 306 million dollars were invested in the travel website Go Where.

The $370 million acquisition of PPS video business is Baidu's big move to strengthen the video middle page, and is Baidu's insistence on the middle page strategy. The purpose of adhering to the middle page strategy is to grasp the Internet portal.

The above source said: Baidu is determined to win the business related to Baidu's strategic business, and is not stingy with its cash, such as the investment in Qunar, iQIYI and other companies, including PPS video business.

Industry analysts believe that the acquisition of PPS and the independent listing of iQIYI will accelerate. But Gong Yu said: "This matter has not been included in the agenda."