China's biggest search engine just became the "largest online video platform" in the country, but does this mean Baidu (NASDAQ:BIDU) is a long-term buy? Motley Fool contributor Kevin Chen thinks so, but not for the reason you might think.
Once the company's $370 million acquisition of online video provider PPS is complete, Baidu-owned iQiyi and PPS will merge to make Baidu the largest online video website by the number of mobile viewers and total viewing time. Both metrics are appealing. However, there's an even more convincing argument when you look into the details of the deal.
Sure, it's nice to have a title like "China's largest online video platform." However, Youku Tudou (UNKNOWN:YOKU.DL) held that title for about a year (after the 2012 merger that brought Youku and Tudou together). Because China's online video market is still nascent, it's likely that another company might steal that title away from Baidu soon.
Really, the deal will help Baidu build out a "complete" website for longer-form, high-quality copyrighted TV shows and movies. Baidu-owned iQiyi already has a good selection of Chinese content, but PPS will help add foreign content, like American TV shows.
Ultimately, this spells trouble for Youku Tudou and Sohu (NASDAQ:SOHU). In the video below, Fool contributor Kevin Chen explains why Baidu's PPS deal may help the company push out online video competitors.
Fool contributor Kevin Chen owns shares of Baidu. The Motley Fool recommends Baidu and Sohu.com. The Motley Fool owns shares of Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.