Investors back app store mobile search venture

Graphics: GT

Wandoujia, a leading Chinese Android app store supported by Taiwan IT venture capitalist Kai-fu Lee, announced on Monday that it has secured another round of investment from a consortium led by Japan's Softbank Corp, in hope of "reinventing search for the mobile era."

Other venture capital firms including US-based DCM and Kai-fu Lee's venture capital platform Innovation Works Development Fund (IWDF), also participated in this round, according to a press release e-mailed to the Global Times Monday.

The $120 million transaction is believed to be the largest non-acquisition fundraising venture in China's Internet industry for all of 2013, Wandoujia co-founder Cui Jin told the Global Times Monday.

The investment is expected to assure Softbank a 20 percent stake in Wandoujia, according to media reports. The company refused to comment, but said Wandoujia's founding team still made the final business development decisions.

As Innovation Works' first publicly supported project, the platform already raised $8 million from DCM and IWDF in 2011.

Wandoujia performed well and amassed a "fairly huge user base" mainly due to its competitive edge in overseas gaming apps, Liu Dalong, an industry analyst with Beijing-based market research firm iResearch, told the Global Times on Monday.

Wandoujia's monthly active users rank second among all Chinese Android app and content distribution channels in the second quarter of 2013, according to iResearch data. Its current users numbered more than 300 million, according to the press release.

But as behemoths like Baidu expand into the sector, Wandoujia faces fierce competition and need more financial support.

In July last year, Baidu bought 91 Wireless for $1.9 billion. 91 Wireless owns the two leading smartphone app distribution platforms in China: 91 Assistant and HiMarket. 91 Wireless also owns the 91 Panda Reader reading software.

After the acquisition, Baidu owned 40.6 percent of the market in the third quarter of 2013, while Qihoo 360, operating an app store 360 mobile phone assistant, ranked second with 24.8 percent and Wandoujia lagged behind at 12.4 percent, according to data issued by Analysys International in November.

"A company that only relies on app distribution cannot survive for long as most apps are offered free," Liu said. "In the future, those who diversify their product range will stand out."

In the second half of 2013, Wandoujia has already launched its video search service: seeking and watching online video content via the platform without downloading video streaming apps like iQiyi and Youku. This is accessible to users on both PC and mobile.

"Nice try," Shenzhen-based Internet research firm iiMedia Research CEO Zhang Yi commented to the Global Times Monday.

Wandoujia could share profits with online video content providers, he said.

Zhang expressed his concern over the prospect of Wandoujia's search business, as the company did not have too many experiences in the sector and is not easy to compete with either the predominant leader Baidu or upstart like Qihoo 360.

Zhang felt the search business should not become Wandoujia's core focus, but a supplementary feature to better serve its users and app developers.

"Wandoujia will continue gaining money largely via ad and profit sharing with gaming app developers," he said.

Mobile app market share, third quarter 2013:

Baidu 40.6%

Qihoo 360 24.8%

Tencent 10.4%

Wandoujia 12.4%

anzhi.com 4.5%

Others 7.3%

Source: EnfoDesk Analysys International