In this article we take a look at news items from this week that have implications for two Chineese internet based service providers under Trefis coverage. These companies are Baidu (NASDAQ: BIDU) and Perfect World (NASDAQ: PWRD).
Baidu: Poaching From Microsoft, Investing In Education
Baidu appointed Zhang Yaqin president for new business, a capacity in which he reports directly to Baidu Chairman Robin Lee. Zhang was lured away from Microsoft (NASDAQ: MSFT). At Microsoft, Zhang was chairman of Beijing headquartered Microsoft Asia-Pacific Research and Development Group – a team of over 3000 engineers. This new talent acquisition is expected to bolster Baidu’s capabilities in technological innovation. It will thereby help Baidu in competing against its Chineese rivals Alibaba and Tencent. 
Zhang’s recruitment also needs to be seen in the light of the recent trend of this trio seeking to diversify away from their core areas to remain competitive. The core areas for Baidu, Alibaba and Tencent are internet search, online commerce and gaming/messaging respectively. 
Baidu currently trails Alibaba and Tencent in terms of estimated company value. On a list of the most valuable internet companies in the world, Baidu is in sixth place. Alibaba, on the other hand, is at third place, and Tencent at fourth. 
In an unrelated develpoment, Baidu continued its investments in the Chineese online education space. It invested $10.6 million in Beijing based online educational platform smartstudy.com, which prepares students for the English language tests TOEFL and IELTS.  It had earlier invested in Chineese educational institution Universal Education Group, which helps students prepare for graduate program admission examinations.  These complementary investments are expected to help Baidu diversify into the online educational space.
Perfect World : Giving A New Lease Of Life To Its Best-Selling Game
Perfect World is all set to roll-out an upgrade and expansion pack to its best-selling game Perfect World International/Perfect World 2. The updates are expected to prolong the life of the game and increase revenue generation from the game. This update will go live in China on September 21st.  We had earlier reported on how the roll-out of new games and launch of expansion packs is impacting Perfect World’s financial performance. (See New Games Fuel Perfect World’s Growth in Q2 2014 and Perfect World Posts Strong Growth)Notes: