In an effort to expand its streaming video ecosystem, Baidu (NASDAQ:BIDU) could soon acquire JOYY‘s (NASDAQ:YY) Chinese operations, according to the digital media outlet Jiemian. JOYY will reportedly retain its larger overseas business.
JOYY’s global average mobile monthly active users (MAUs) grew 21% year-over-year to 457.1 million last quarter. But 91% of those MAUs were outside of China, so Baidu would only gain a small slice of its business.
JOYY’s core platform in China, YY, hosted 41.2 million mobile MAUs last quarter — up 6% from a year ago. However, YY’s number of paid users fell 2% year-over-year to 4.1 million, mainly due to the COVID-19 crisis.
Why does Baidu want YY?
Baidu owns the largest search engine in China, but its advertising revenue has fallen year-over-year for five straight quarters.
It attributed its lower ad sales, which accounted for 68% of its top line last quarter, to the economic slowdown in China, the ongoing U.S.-China trade war, and competition from rival platforms like Tencent‘s (OTC:TCEHY) WeChat and ByteDance‘s Douyin (known as TikTok overseas).
The decline of Baidu’s core advertising business forced it to rely more heavily on the growth of its streaming video platform iQiyi (NASDAQ:IQ). But iQiyi remains unprofitable, and the higher mix of iQiyi’s revenue weighed down Baidu’s margins and earnings.
To counter that slowdown, Baidu is expanding its ecosystem