China internet services and products company Baidu, Inc. will acquire the domestic business of livestreaming social media company JOYY Inc. - formerly known as YY Inc., according to news reports.
The acquisition is expected to be announced within two weeks. Neither company has made a statement.
Nasdaq-listed JOYY stock was at $88.10 in U.S. pre-market trading Monday and the price rose as much as 13.18% Friday to close at $85.13.
Focus On Overseas Market
Jiemian News initially reported sources on career and social-networking app Maimai saying Baidu was nearing an acquisition of JOYY and the two were close to completing negotiations. JOYY's overseas business won't be included in the deal.
Analysts say the acquisition makes sense for JOYY because it has hit its "domestic business ceiling."
JOYY reported up to 457 million international monthly active users - including on its YY LIVE, BIGO LIVE, Likee, HAGO and YY dating apps. More than 90% of its users are from overseas, according to the company's second quarter financial report.
Also, 102.3 million of its livestreaming monthly active users are international - a rise of 20.4% year on year. YY LIVE has 41.20 million users in China while in overseas markets BIGO LIVE and HAGO saw 29.40 million and 31.70 million monthly active users, respectively.
The company's report showed BIGO LIVE's streaming revenue had, for the first time, accounted for more than half of the group's livestreaming revenue.
JOYY founder David Li Xueling has shifted the company's concentration to overseas markets. In March 2019, it completed the acquisition of Big Inc., which is headquartered in Singapore and owns BIGO LIVE and LIKE and delivered rapid user growth in 2018.
JOYY was listed on the Nasdaq in November 2013 with an initial trading price of $10.5 per share.
Domestic Livestreaming Expansion
Baidu announced during May's Baidu 2020 Mobile Ecosystem Group Conference that it would promote livestreaming services this year.
There were rumors at the conference that Baidu would appoint Gu Feng, the former founder of esports livestreaming company Huya, to act as the head of the new livestreaming team. Gu was responsible for pivoting the livestreaming service at JOYY.
The company would spend 500 million yuan ($74.67 million) to train 1,000 livestreamers, according to Ping Xiaoli, vice president and general manager of Baidu.app. A big part of the spending has allegedly gone to promote Baidu's "knowledge videos" via livestreaming.
Meanwhile, Baidu has launched e-commerce livestreaming for suppliers in online trading and transactions.
Analysts said Baidu's acquisition of YY's domestic operations might complement its comprehensive enhancement of its livestreaming.
The two companies' collaboration can be traced back to 2014. During the ChinaJoy Event, an annual digital entertainment expo, the two forged a strategic partnership in which users on Baidu Tieba, a communications app, can access popular livestreaming esports games as well as become online friends with livestreaming anchors.
Traditional Livestreaming Transformation
As of March, there were 24.275 million monthly active users on JOYY's domestic app YY LIVE - top among competing domestic entertainment services including Huajiao, Yizhibo, Inke and Momo, according to iiMedia.
However, in the face of competition from short-video platforms such as TikTok and Kuaishou, traditional livestreaming apps have been bottlenecked in development.
In the past six months JOYY saw a 4.5% decline in revenue while Momo saw a 5.25% decrease.
Analysts said if Baidu acquired JOYY's domestic business, a new wave of livestreaming battles would unfold between Tencent, Baidu and ByteDance.
In August, JOYY transferred 30,000,000 Class B ordinary shares of HUYA Inc. to Tencent Holdings for an aggregate purchase price of $810.0 million in cash.
