Alibaba Group, UCWeb to Form Joint Venture Focusing on Mobile Search

BEIJING—Alibaba Group Holding Ltd. is joining with mobile browser company UCWeb Inc. to introduce a new search service for China’s growing number of smartphone users, according to two people familiar with the matter.
UCWeb will maintain a controlling stake in the joint venture, which will be called Shenma Inc., according to one of the people. The new company will include employees who previously worked at Chinese search giant Baidu Inc.,as well as Google Inc., according to the person. Financial terms weren’t immediately clear.

The new expansion into mobile search is designed to take advantage of the change in user behavior that has come as more Chinese use smartphones instead of personal computers to get online. Analysts say the tendency of smartphone users to spend more time on mobile applications could open up fresh opportunities for search. There are now more than 500 million smartphone users in China, according to a Chinese government statistics.

The Alibaba-UCWeb mobile-search initiative comes as China’s largest Internet companies, including Alibaba and Tencent Holdings Ltd. , have been aggressively expanding into a host of services.

Over the past year, Alibaba—which runs several of China’s most popular e-commerce sites—has been spending heavily to increase its holdings in media, real estate, logistics, social media and even software to support financial transactions. Tencent has been pushing into e-commerce to challenge Alibaba by partnering with China’s second-largest e-commerce site, JD.com.

Baidu currently dominates search in China from personal computers, with roughly three-quarters of the market by revenue, according to research firm Analysys International. Though analysts have worried about Baidu’s ability to make money off mobile search, the company posted strong first-quarter earnings last week, in part due to growing number of users and advertisers for its mobile services. Baidu Chief Executive Robin Li said in a conference call Friday that the company had more than 160 million daily active users for its search application, up from 130 million just two quarters before.

Baidu spokesman Kaiser Kuo said on Monday that mobile search “has long been a top priority for Baidu, and we’re confident that by focusing on user needs and continuing to innovate to provide the best possible mobile search experience, we will continue to grow our market share.”

Other companies have moved into search. In August 2012, Qihoo 360 Technologies Co. introduced its own search engine. In September 2013, Alibaba rival Tencent invested $448 million for a minority share in Chinese search engine Sogou, which is run by Sohu.com Inc. Smaller startup Wandoujia, which has focused on mobile app distribution, has also started its own search service that can search across the content within applications.

In August 2013, Alibaba founder Jack Ma took a seat on the board of UCWeb after the company made two strategic investments in the startup. UCWeb’s downloadable Internet browser application is a streamlined alternative to the standard browsers that come with many smartphones in China.

Despite the earlier Alibaba investment, Baidu and UCWeb held talks about a strategic investment in 2012, though they didn’t result in an investment, according to a person familiar with the matter.

UCWeb Chief Executive Yu Yongfu will become chairman of the new joint venture, according to one of the people.

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