Baidu to buy app distributor 91 Wireless for $1.9 billion

Baidu Inc., which operates China's most popular search engine, said Tuesday it will buy smartphone apps distributor 91 Wireless for $1.9 billion, adding to the scramble for the fast-growing Chinese mobile Internet market.

Beijing-based Baidu said it would buy 57 percent of 91 Wireless Websoft Ltd. owned by NetDragon Websoft Inc., a Chinese games developer, and the rest from other shareholders.

91 Wireless operates two smartphone app distribution platforms in China, 91 Assistant and HiMarket, that it says have been used to download more than 10 billion apps. The company says it is China's biggest third-party app distributor by both active users and accumulated downloads.

China has the world's biggest population of Internet users, with 564 million people online at the end of last year, according to government data. The number of people who go online using mobile phones, tablets and other wireless devices rose 18 percent last year to 420 million.

Baidu dominates traditional Internet search with nearly 80 percent of the market in China. But it faces tough competition in mobile search, where its market share has eroded.

Baidu's share of mobile search declined to 66.9 percent in March from 77.5 percent last July. That followed the launch of a rival service in mid-2012 by Qihoo 360, an information security company, which quickly gained a market share of more than 13 percent.

Beijing-based Baidu has expanded from search into music downloads, online video and other services.

In May, it announced the purchase of Internet video service PPS Net for $370 million. It said that, combined with the iQiyi.com service it already owned, would make it China's biggest mobile video platform by user numbers.

In a reflection of tougher competition, Baidu said its earnings rose 8.5 percent over a year earlier in the three months ending in March but that was down sharply from the previous quarter's 36 percent growth. The company said research and development costs increased 83 percent.