Xiaomi Inc., China’s leading smartphone manufacturer will invest $300 million for an undisclosed stake in online video content provider, iQiyi. Chinese search giant Baidu (BIDU), which is already a stakeholder in iQiyi with over 16% share also announced that it was increasing its stake. Further details weren’t available.
Why the Investment?
For Xiaomi, associating with iQiyi, one of China’s leading online video sites, means that it will have additional content to offer as it tries to attract more users to its multi-screen ecosystem of smart televisions and smartphones.
On the other hand, iQiyi can increase its market share by reaching users who use devices manufactured by Xiaomi, the world’s third-largest producer of smartphones.
According to iResearch, September of this year saw 450 million active users spending 2.2 billion hours watching videos on iQiyi’s site. More than 60% of its traffic came via mobile devices, a number that iQiyi hopes to grow by targeting the 85 million users of MIUI, Xiaomi’s Android skin that powers its devices.
This is Xiaomi’s second investment in video content providers this month. Earlier, Xiaomi entered into a strategic partnership with Youku-Tudou, the value of which was also unrevealed.
Xiaomi backs its increased focus on video content with a commitment of up to a billion dollars, so investments such as these may be expected to continue. The decision couldn’t have come at a better time since Chinese regulators are cracking down on foreign content, which should be positive for local players. Notably, ecommerce giant Alibaba (BABA) also recently invested in video content company Youku-Tudou.
Like Xiaomi’s deal with Youku-Tudou, its collaboration with iQiyi will enable the two to generate new content jointly.
Shunwei Capital, set up by Xiaomi’s founder and CEO Lei Jun, will invest in iQiyi along with Xiaomi.
Other Stocks That Warrant a Look
Baidu currently has a Zacks Rank #2 (Buy). Investors interested in the industry may also consider stocks like Mercadolibre, Inc. (MELI) or World Energy Solutions, Inc. (XWES) While Mercadolibre sports a Zacks Rank #1 (Strong Buy), World Energy Solutions carries a Zacks Rank #2.
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