Chinese search engine company, Baidu is seeking to raise $500m to invest in its Waimai food delivery service.
The company is strengthening its service as it has been facing cut-throat competition from other Chinese internet companies. Baidu has been looking for investment of at least $300m, but the funding round has yet to be finalised according to Bloomberg.
Waimai food delivery service uses scooters to deliver food, from Starbucks coffee to sliced sashimi. At present, the unit is facing competition with its rivals in both hiring people to conduct operations and in tie-ups with restaurants to expand its services.
One of Baidu’s competitors Ele.me recently secured about $1.25bn of investment from Alibaba Group and Meituan-Dianping, backed by Tincent Holdings. Recently, there were speculations about Baidu considering to sell or merge Waimai with the Nuomi group buying unit.
The Chinese market has been seeing heavy investment in online-to-offline or O2O market. Costs have been rising and companies are resorting to subsidies to build their own services and to gain a foothold in the market.
Fierce competition has led to some players exiting the market. Earlier this year, Delivery Hero, a German-based company quit the Chinese market.
In August, Baidu filed a suit against Tencent and Sohu.com over some articles which allegedly tried to defame Waimai by saying that the restaurants under its service had poor hygiene.
For about a year now, Baidu has been trying to find profitable ways to invest, as the company’s profitability has been decreasing due to an increase in the mobile usage over the years.
The company experienced a fall in its operating margin to 15.3% this September. Last year, the operating margin stood at 17.6% and it was more than 50% in 2011.
When Baidu announced that it will be selling its iQiyi video streaming services, there was a cheer from its shareholders, as it was believed that the sale could bring down operational costs. But, the deal was scrapped in July.