How Baidu, Alibaba, and Tencent are Investing in VR

by Michael Park • July 13th, 2017

The BAT web companies — Alibaba, Tencent and Baidu — are using their war chests for a different take on virtual reality (VR) than their overseas competitors. Instead of building and investing in headsets like Facebook of the US, Sony of Japan and HTC of Taiwan, the Chinese trio are becoming middlemen: creating platforms and content for when a dominant headset emerges.

With 688 million Internet users in China alone, BAT already have a massive audience for VR content consumption. China’s fast growing VR market is expected to reach 55 billion yuan in value by 2020, up from 1.5 billion yuan last year, according to the Guangzhou research firm iMedia. Chinese consumers will buy 40 percent of the 6.3 million VR headsets expected to be shipped globally this year, according to Canalys.

In this piece, we look at BAT’s investments in VR and how they are shaping the burgeoning Chinese VR market.

Baidu

Through iQiyi, its streaming-video service, Baidu said in May that it intends to build the world’s biggest Chinese-language VR service. IQiyi is already working with over 300 partners to do so, including Chinese VR manufacturer Beijing Baofeng Technology. IQiyi recently released an app suite that makes its movies and games compatible with head-mounted VR devices. The company is also toying with streaming live concerts and producing VR films, which will become more flexible in the future, with storylines changing based on consumer preferences.

China seems to be a promising market for VR video content. China’s Ministry of Industry and Information Technology has said it expects immersive video and game applications to be among the first segments of the VR industry to mature. About 504 million Chinese consumers are already regularly using streaming websites, which may help VR live-broadcasting to catch on quickly.

Companies leading the Chinese VR market are increasingly moving toward creating entertainment experiences, unlike in the US, where the focus has been on creating expensive, high-end hardware. Interest among Chinese consumers is high: one survey by Niko Partners last year found that half of Chinese gamers are interested in VR and 30 percent were willing to spend up to $200 on a device.

Tencent

This may explain why Tencent is also investing in video and game VR content. The company has live-streamed VR concerts for music artists, and has bought the rights to 300 Japanese anime franchises, and is expected to, as a result, add more smartphone games — a lucrative market. China has nearly 400 million online games players, according to CNNIC, and online game revenue is expected to grow from 143 billion yuan last year to 251 billion yuan by 2018, according to IResearch.

Tencent has also invested in Original Force, which creates computer-generated VR content and is working on VR movies for use with Oculus Rift. Original Force is also working with Pulse Evolution, which has created holograms of pop music stars for use at concerts. We think the investments make strategic sense for Tencent, which needs compelling content to keep the 1.3 billion active users on its WeChat and QQ instant-messaging services engaged for longer.

Alibaba

Alibaba, meanwhile, is building VR shopping experiences for its 400 million users. The Chinese ecommerce giant has already built 3-D renderings for hundreds of products and will enable merchants to create their own VR-enabled shopping experiences, Bloomberg reported. Alibaba debuted its VR mall, called Buy+, last year. It used Google Cardboard, which can be distributed at close to nothing. Such efforts are likely to sit well with Chinese consumers, who are less willing to spend big on high-end console VR, but have warmed to cheap mobile devices and VR experiences. When Alibaba released Buy+, 30,000 people tried the platform within an hour of launch, according to the company.

In addition, Alibaba has created a payment service that enables shoppers to pay for things using VR with a nod of their head. VR Pay, as it is known, verifies users via biometric recognition technology that recognizes each consumer’s unique voice before authorizing payment of goods.

Thus far, there is no clear leader in the great Chinese VR race. But it is clear that the mighty BAT are looking beyond hardware and are scrambling to create the dominant platform — and content that will sit on it — for when a major headset eventually emerges in China.

This is a guest post produced by Michael Park, not the UploadVR staff. Michael Park is the founder of LipSync, a VR and AR development studio based in San Francisco and Hong Kong. No compensation was exchanged for the creation of this content.

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