Baidu, Alibaba, Tencent, and the World of Virtual Reality
Personalities from hip-hop dance, military marchers, and daredevils in winged suits are luring Internet titans in China into the world of virtual reality. A lot of these video stars have come together with South Korean pop idols and animated fireflies in a whopping $1.1 billion global VR spending galore that is being financed by Alibaba Group Holding Ltd, Tencent Holdings Ltd, and Baidu Inc.
Baidu, Alibaba, and Tencent Jump on the VR Bandwagon
These three web giants are leveraging their wealth to employ a new perspective on the virtual reality business, and instead of manufacturing headsets like Sony, Facebook, and HTC, these companies are acting as middle men, backing many startups and opening their platforms to developers of content and hardware as they patiently wait for a dominant headset to arise.
Baidu, Alibaba, and Tencent all want to direct their attention toward crating platform and content, said Ricky Lin, a Beijing-based analyst at iResearch.
“The issue facing China’s VR industry at this point is that it lacks core technology, so they need to hedge their bets,” Lin commented.
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The long play here is to capitalize on a domestic VR market, which is estimated to grow by thirty-six times its present size in the next four years to 55 billion Yuan (about $8.5 billion). This amount of spending comes as Pres. Xi Jinping tries to push the slowing economy through innovation and bringing down how much dependence they have on heavy industries. The country commenced a campaign to aid and support entrepreneurship in 2014, and since then, it has launched 1,600 high-tech incubators for startups.
Right now, around 200 startups are working in China’s virtual reality industry, according to IQiyi.com Inc., a unit under Baidu. Venture capitalists investments in China skyrocketed by 50 percent to $12.2 billion in the first quarter, according to London consultancy Prqin Ltd. In that very period, close to $1.1 billion was invested in the VR industry.
“A lot of people think that this industry will mature fast with the push of capital and media,” said Duan Youqiao, who oversees IQiyi’s initiative. “The VR industry right now is like when we were still living in the ages when horses pulled carriages.”
Baidu, Alibaba, and Tencent, often collectively referred to as BAT, have a combined market capitalization that is way bigger than Israel’s GDP, and they serve around 688 million internet users in China alone. The VR market in China is expected to climb up to 55 billion Yuan in value by 2020 from 1.5 billion Yuan last year according to Guangzhou-based researcher iiMedia.
The areas that hold the highest promise is the online video with 504 million Chinese already using streaming sites regularly. Immersive video and game applications will probably the first VR industry to mature, according to China’s Ministry of Industry an Information Technology.
“There isn’t a clear leader for VR content in China,” said Jason Low, a Shanghai-based analyst with Canalys. “Local content providers, game publishers, and service providers are racing to exercise their influence on the development of VR beyond hardware.”