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Qunar / Baidu – Why We’re Excited

On Friday, China’s leading Internet search player Baidu announced its $300 million investment in China’s leading travel web site, Qunar.  GGV Capital has been an investor in Qunar since 2009, and GGV Capital Partner Jixun Foo played a key role in working with the management team to orchestrate the deal (Jixun also used to serve on the Board of Baidu).  Following the transaction, Qunar will remain an independent company and all of its shareholders will retain equity in the new company along with Baidu.  We have long believed Qunar was one of the top emerging web properties in China, and the Baidu relationship should only further the company’s lead position in the travel market in China.

I’ve gotten a lot of questions from folks in the US about the Qunar/Baidu deal.  I was with Jixun in Shanghai this past weekend, and thought I would post a short Q&A with him to provide some context on Baidu/Qunar.

JR:  This is obviously something that has been in the works for some time.  What was the genesis of the idea and the conversation between the two companies?

JF:  At a high level, two things.  1) There’s a good relationship between the two companies and a lot of mutual respect.  2) There are obvious synergies between what Qunar is doing, and what Baidu wants to do in travel.  Both sides see the massive market opportunity, and given the strong relationship and respect, it wasn’t hard to begin a dialogue.

Qunar gets the best of both worlds – a strong alignment and the resources of Baidu plus the opportunity to continue to grow and expand as an independent company.

JR:  Can you give us a little perspective on the travel market in China, and why this is a “big deal?”

JF:  Historically, the travel market in China has been the opposite of the US.  In the US, the majority of the spend is on leisure/vacation travel.  In China, it has always been about business travel.  As incomes rise in China, we are seeing an increased spend on leisure travel.  With 1.3 billion people, it is obviously a market that has huge potential.  Fritz and CC were early to see the opportunity, and began building Qunar back in 2005.  Six years later, more than 44 million people visit the Qunar web site every month, conducting more than 4 million search queries every day.

If you think of what happened with the travel market online in the US, you have tens of billions of dollars of value created with companies like Expedia, Travelocity, Priceline, Hotwire, HomeAway, Kayak, etc.  In China, we’ve had Ctrip and eLong.  That’s it.  There’s plenty of room for a new player to emerge, and Qunar is poised to do so.  The relationship with Baidu should only accelerate this.

To use a US analogy, I guess this would be sort of like Google lining up with one of the top emerging web companies to go after a massive, high-profile category.  Travel is much more mature in the US, but perhaps Social or Mobile would be good analogies?

JR:  You were an early investor in Baidu and sat on the board for many years.  Today Baidu is one of the most valuable technology companies in the world, valued at more than $40 billion.  How do you think about Qunar in relation to what you saw in the growth years with Baidu?

JF:  Well, for starters, both companies have great management.  The founding teams hired great people around them, built great cultures and a ton of momentum in the market.  Robin (founder/CEO of Baidu) was an early visionary in the Internet space in China.  When he started Baidu, the market for Internet advertising in China was less than $50 million annually.  Today it’s more than $5 billion and growing rapidly.  The Internet space in China was a bit more mature when the team launched Qunar in 2005, but travel was – and still is – very early.  The number of travelers booking online, online travel spend and online travel media are all growing rapidly.  It’s still early in the life of Qunar, but the company has a ton of potential, which is why management and the investor group are so pleased we were able to structure a deal where the company remains independent.

JR:  I know you played a lead role in helping to structure this deal.  It must have felt great to see it come to fruition and have CC publicly thank you for your efforts?   (see Weibo post below)

JF:  The investor group as a whole – GSR and Tenaya along with GGV – was very supportive and instrumental.  Given my prior relationship with Baidu, I was certainly able to help move the ball forward, but CC, Fritz and the Qunar team working in conjunction with the Baidu team made this happen.  The investors are all retaining an ownership stake in Qunar, and are very excited to see where it goes from here.






The Weibo (similar to Twitter here in the US) post above is from CC, co-founder and CEO of Qunar.  It reads “GGV led the negotiation and made the deal possible, thanks a lot to Jixun,” followed by the deal announcement.

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