Snapchat renews deal with Baidu
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Snapchat renews deal with Baidu

 

When investors think of Snapchat, the image-based social media site that’s in competition with Instagram and others, moving into China, they probably think of Tencent. The Chinese tech titan is an investor in the smaller company, after all. However, Snapchat’s presence in the country is actually reliant on another one of China’s big internet companies – search engine market leader Baidu. Snap and Baidu went into partnership tow years ago, allowing Baidu to resell Snap ads in China, Japan, and South Korea. Now, that partnership has been extended.

Baidu’s share price decreased by 3% over last week

Snapchat July 24

Source: Yahoo Finance

China has a complicated relationship with international social media. Snapchat, like Facebook and others, is officially blocked in mainland China. However, these companies are allowed to sell ads to Chinese companies who are looking to expand overseas and see the social media platforms as marketing channels. This is a lucrative business – last year alone, Chinese companies spent $5 billion on Facebook ads, and the country is now Facebook’s second-largest ad market after the US. Snapchat is hoping to get its hands on some of those dollars by leveraging Baidu’s local knowledge, market-leading online platforms, and expertise in artificial intelligence (AI). In exchange, Baidu gets to keep a cut of the profits.

This is good news for Baidu. The company generated nearly three quarters of its revenue from ad sales last quarter, but only saw 3% year on year growth. That’s a big slowdown from the kind of double-digit growth investors had gotten used to in its ad business. Reselling lucrative social media ads to Asian audiences will give it access to another market – one with a proven weight behind it.

Disclosure

Dominion holds Baidu in its Global Trends Ecommerce Fund.


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