The streaming video service iQiyi, a business owned by China’s online search giant Baidu, dropped 13.6% in its first day of trading on the Nasdaq — closing at $15.55, or down $2.45 from its opening price of $18.
The company still managed to pull off one of the largest public offerings by a Chinese tech company in the past two years raising $2.25 billion — the only Chinese technology company to make a larger splash in U.S. markets is Alibaba — the commercial technology juggernaut which raised $21.5 billion in its public offering on the New York Stock Exchange in 2014.
“It’s a special day and an exciting day for iQiyi, and I will say it’s also an exciting day for the Chinese internet,” said Baidu chief executive Robin Li of the iQiyi public offering.”Eight years ago, when we got started, we were not the first one, we were not the largest one, but we gradually worked our way up, and caught up and surpassed everyone. It has been not an easy journey, but finally we are public. We surpassed everyone. That’s because we have a very strong team. I have a full confidence on Gong Yu and on the whole iQiyi Team.”
Over its eight year history there’s no doubt that iQiyi has gone from laggardly to lustrous in the Chinese streaming video market. Baidu’s offering and Tencent’s video service have both managed to overtake the previous market leader Youku Tudou, which was acquired by Alibaba in 2016.
Tencent leveraged its 980 million monthly active users on the WeChat mobile messaging app, the 653 million monthly active users on its older QQ messaging platform and the company’s attendant social network (think Facebook) to juice growth of its video streaming offering, according to analysis from The Motley Fool.
For Baidu, the company’s pole position for online search became critical to the growth of iQiyi — along with a partnership to China’s ubiquitous hardware manufacturer and technology developer Xiaomi. The company also locked in early content licensing deals with big Hollywood studios like Lions Gate and Paramount — and a deal with Netflix to juice its subscriber base in China. By the end of 2017, Baidu was claiming more than 487 million monthly active users for the service.
The former leader in China’s video streaming market, Youku Tudou, seems to have wilted under the weight of its acquirer’s platform. Alibaba’s ecommerce was never a natural fit with online video streaming.
For all of their massive user bases each of China’s leading video streaming services face a profitability problem. For its part, iQiyi went to market with substantial losses of $574.4 million for the last fiscal year.