Internet giants changed into investment vehicles – Shaun Rein

Internet giants Baidu, Tencent and Alibaba increasingly buy into innovative companies to stay ahead of the competition. They have become dominant investment vehicles, says business analyst Shaun Rein, author of The War for China’s Wallet: Profiting from the New World Order, to the South China Morning Post.

The South China Morning Post:

The investment splurge by Chinese technology companies is not too dissimilar to that of their US counterparts, many of which historically acquired or invested in firms that were deemed as key to future growth. Facebook, for example, bought photo-sharing app Instagram in 2012 and messaging platform WhatsApp in 2014, while Google acquired YouTube in 2006 and navigation app Waze in 2013.

“Companies like Baidu, Alibaba and Tencent have become like investment companies. They are sitting on top of piles of money and they are figuring out how to try and make the best use of it,” said Shaun Rein, managing director at China Market Research Group. “The rate of investments is increasing because they’re trying to stay ahead of each other. Their major business lines have got so big that they are not going to get the same growth they are used to and it’s faster to buy technology and market share than to grow it organically and sustain a similar pace of growth.”…

“Baidu is looking to become a technology leader. They’re trying to come up with innovation in artificial intelligence and autonomous driving,” said China Market Research Group’s Rein. “Baidu needs to find another growth driver, as the search business doesn’t have the same stickiness factor with consumers and advertisers that Tencent and Alibaba have with social media and e-commerce. So in a way, their back is against a wall where they must innovate to keep up.”