Baidu’s Decision to Cancel YY Live Acquisition Reflects Shifting Focus to AI
Baidu’s recent move to cancel its acquisition of YY Live, a live-streaming platform owned by Joyy, has not come as a surprise to industry analysts. The cancellation can be seen as a reflection of the changes taking place in China’s internet sector, as Baidu shifts its focus towards generative AI. The cancellation of the deal allows Baidu to concentrate on its AI-centric business and product strategy, which is expected to drive sustained revenue and profit expansion. Baidu’s co-founder, chairman, and CEO, Robin Li Yanhong, expressed this sentiment in the company’s third-quarter earnings report, emphasizing the importance of Baidu’s Ernie and Ernie Bot ecosystem.
Baidu’s AI Strategy Boosted by Canceled YY Live Deal, Analysts Say
Analysts from Jefferies believe that the cancelation of the YY Live acquisition will give Baidu’s AI business a significant boost. Baidu has been actively investing in AI, and the success of its AI chatbot, Ernie Bot, has already demonstrated the company’s capabilities in this field. Ernie Bot has achieved a milestone in its user base and has helped Baidu reconstruct all of its products with AI. This move allows Baidu to strengthen its AI-centric business and product strategy. Baidu has been actively expanding its AI services, with thousands of enterprises adopting them and Ernie Bot amassing more than 100 million users as of December 28.
Ernie Bot Milestone Sets Stage for Baidu’s AI Business Expansion
Baidu’s success with its AI chatbot, Ernie Bot, has set the stage for the expansion of the company’s AI business. During the Baidu World 2023 conference in Beijing, it was announced that Ernie Bot matches the capabilities of OpenAI’s GPT-4. This recognition showcases Baidu’s advancements in the field of generative AI. The launch of Ernie Bot’s paid version in November further underscores Baidu’s commitment to AI. Subscribers can make 100 inquiries every three hours, while the more basic version, Ernie 3.5, remains free for public use. Baidu aims to leverage its achievements with Ernie Bot to drive revenue and profit expansion within its AI ecosystem.
Joyy Considers Options as Baidu Terminates YY Live Purchase Agreement
While the cancelation of the YY Live acquisition is a boon for Baidu’s AI business, it leaves Joyy, the parent company of YY Live, considering its options. While Baidu aims to discuss the next steps with Joyy, the latter is seeking legal advice and exploring all possible courses of action. Joyy claims that the deal was substantially completed in February 2021, with certain matters still to be resolved. The termination of the purchase agreement has caused a decline in Joyy’s market cap, as its shares closed lower than their November 2020 level. The future of YY Live, without the support of the Baidu acquisition, remains uncertain.
Tough Competition and Regulation Factors in Baidu’s YY Live Decision
Beijing-based angel investor Timothy Guo Tao suggests that fierce competition and tougher regulation in the live-streaming sector in China could have played a role in Baidu’s decision to cancel the YY Live deal. YY Live’s monthly active users have been overshadowed by competitors such as Douyu International and Huya. The Chinese government’s block of the merger between Douyu and Huya in July 2021 was a significant development in the industry. Moreover, YY Live had faced criticism from US hedge fund Muddy Waters, accusing it of fraudulent practices. With the cancelation of the merger, YY Live needs to rethink its competition strategy as it lags behind in the live-streaming industry. Additionally, tighter regulation by mainland authorities poses further challenges for YY Live in maintaining competitiveness. The arrest of Douyu’s CEO in November sent a signal that regulatory scrutiny of the live-streaming industry would intensify, further impacting YY Live’s operations.
Analyst comment
Positive analysis: Baidu’s decision reflects a strategic shift towards AI, which is expected to drive sustained revenue and profit expansion. The success of Ernie Bot showcases Baidu’s capabilities and sets the stage for further AI business expansion. Baidu’s AI strategy is boosted by the canceled YY Live deal, according to analysts.
Neutral analysis: While Baidu benefits from the canceled deal, Joyy is left considering its options and seeking legal advice. The future of YY Live is uncertain without the support of the Baidu acquisition.
Negative analysis: Fierce competition and tougher regulations in China’s live-streaming sector, as well as criticism and fraudulent accusations against YY Live, likely played a role in Baidu’s decision. YY Live needs to rethink its competition strategy and face challenges in maintaining competitiveness due to tighter regulation.
