Baidu’s O2O Blitz Finds Friend in Noodle Chain

Baidu and Japanese noodle brand Ajisen Ramen tie the knot

Leading search engine Baidu (Nasdaq: BIDU) has found a major new ally as part of its drive into the online-to-offline (O2O) business, inking a major new deal with the Japanese noodle chain Ajisen Ramen (HKEx: 538). The new tie-up will see Ajisen and another investor pump $70 million into Baidu’s takeout dining service.

Baidu has been positioning its group-buying site Nuomi as the centerpiece of its O2O efforts in the group buying and takeout delivery business, with plans to spend a massive 20 billion yuan ($3.2 billion) over the next few years to expand the business to take on current industry leaders Dianping and Meituan. But investors seemed uneasy with the aggressive spending that has been eating into Baidu’s profits.

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According to its announcement, Ajisen and another investor named Hina and Hanking have agreed to invest $70 million in Baidu Takeout Delivery, with Ajisen providing $60 million of the total. In exchange for their investment, the 2 partners will get an equity stake of less than 10 percent in Baidu Takeout, meaning this particular investment will value Baidu Takeout at up to $700 million.

The deal looks like an interesting and potentially potent variation on the current takeout delivery model, which typically sees restaurants offer their food over multiple platforms to customers who want to eat at home. Presumably, Ajisen and Baidu will work closely to offer strong promotions together, and Ajisen could potentially even make the agreement exclusive and decline to work with other takeout delivery services.

New deal for new ways of conquering the market?

I have to give credit to Baidu for doing something that the others haven’t really explored yet, by selling a stake in its takeout dining service to a major restaurant chain. Perhaps we’ll see some other restaurant chains follow AjisenRamen’s lead, which would certainly add an interesting new ingredient to the O2O take-out dining wars. I’m not convinced yet that Baidu will succeed at this latest endeavor, but it is definitely following a recent pattern of spending aggressively to build up its new businesses.

Doug Young, Young China Biz

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