Baidu said on Monday it is acquiring Joyy’s live-streaming service YY Live in China for $3.6 billion in an all-cash deal as the Chinese internet giant makes a further push to diversify beyond its core search business and play catch-up in video entertainment.

The announcement, which Baidu shared on the sidelines of its quarterly earnings, is the Chinese firm’s biggest foray into video streaming. YY today is only selling its China business to Baidu. The closing of the transaction is subject to certain conditions and is currently expected to occur in the first half of 2021, Baidu said.

The deal comes at a time the search giant has been struggling to fight newcomers such as ByteDance, who has been eating away at its online advertising dominance as Chinese users allocate more attention to algorithm-driven content recommendation apps.

Meanwhile, the sale allows Joyy to further focus on overseas growth as its home market becomes saturated with video giants like Kuaishou and TikTok sister Douyin. Joyy, regarded as the pioneer in China’s live streaming industry, has amassed more than 4 million paying subscribers who watch influencers perform and sell a range of items on the video app.

Joyy last year completed a buyout worth $1.45 billion of Bigo, a project started by its own founder on the side to test the overseas market. Bigo operates streaming app Bigo Live and short video app Likee, which both have massive followings outside China but were recently banned by the Indian government as border tensions between India and China flared up.

“This transaction will catapult Baidu into a leading platform for live streaming and diversify our revenue source.” said Robin Li, co-founder and chief executive of Baidu, in a statement.

“YY Live stands to benefit from Baidu’s large traffic and thriving mobile ecosystem, while Baidu will receive immediate operational experience and knowhow for large-scale video-based social media development, as well as an enviable creator network that will further strengthen Baidu’s massive content provider network.”

Baidu faces an uphill battle in China’s video streaming market. Both Kuaishou and Douyin, known as the country’s leading players in short videos, have made live streaming an integral part of their user experience to enhance monetization (through the likes of virtual gifting) and user engagement.

Kuaishou reached 300 million daily active users in June and Douyin crossed 400 million DAUs in January. In comparison, Baidu’s main app had about 200 million DAUs as of September. YY saw about 40 million live streaming monthly active users in the third quarter.

The story was updated with background information on Joyy.

Source: News