Chinese Internet giants' heavy investment in online-to-offline services is expected to intensify and fuel revenue growth in the coming 12 to 24 months, rating agency Moody's said Monday.
Baidu, Tencent and Alibaba have been locked in a race over the past two years to snap up startups or run their own ventures to provide a growing list of services ranging from taxi hailing to food delivery.
But Moody's noted that these ventures, known more commonly in China as online-to-offline (O2O) services, are still in an early stage of development.
Investing in these ventures has cost the companies hundreds of millions of dollars, but Moody's analyst Lina Choi said they will pay off for the three tech giants through advertisements and commissions.
This, according to the rating agency, will create new, more sustainable revenue sources for the three firms.
The three companies have been influential in China's budding Internet sector as each have managed to hold a sizable user base.
By teaming up with them, startups can tap the three firms' broad user bases to reach more people.
Revenue growth in the six months ending in June was 36.5 percent for Baidu, 28 percent for Alibaba, and 20 percent for Tencent.
Moody's expects this level of growth to continue through 2017 as the three firms begin receiving payments from a growing number of merchants and service providers that use their platforms.
