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Baidu Eyeing $500 Million for Food Delivery Unit

| Nov 12, 2016 07:10 AM EST

A woman walks toward a booth owned by Baidu at the China (Shanghai) International Technology Fair in Shanghai in April.

China's Baidu Inc. is looking to raise $500 million to fuel its Waimai food delivery business amid a tug-of-war for customers in one of the world's largest economies.

Baidu is eyeing at least $300 million in fresh funding, but the final round is yet to be determined.

Baidu appears to be challenged by the stiff competition against local rivals, particularly Alibaba's Ele.me and Tencent's Meituan-Dianping business. Ele scored recently a $1.25 billion investment from Alibaba, putting its market share to 40 percent. Baidu owns a measly 9 percent of the market, according to Forbes.

Baidu's food delivery business is also being challenged by the recently launched Amazon Prime, which could pave the way for the expansion of Amazon Restaurants in key Chinese cities, according to the Business Insider.

The search engine company also lags behind competitors in the race for funding.

"As investors become more selective in the crowded meal delivery space, Waimai's margin for error is small considering how far it lags behind competitors," the Business Insider wrote.

Baidu, however, is keeping its lips sealed on future plans. It has previously denied rumors of selling Waimai and dodged reports of a possible merger with its group-buying service business Nuomi.

The company can use at least two major advantages as it sells itself to investors, said the Business Insider.

Baidu can use its position as the premier search engine company in China, giving it an edge in raising visibility for local stores.

Demand for O2O services is also growing especially in China, which makes for a perfect backdrop for Baidu.

The O2O market in China saw a massive 38 percent year-over-year growth in 2015, reaching almost $50 billion, per iResearch Consulting Group.

By 2018, it is predicted to reach $92 billion, on which Baidu can capitalize to pump up sales.

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