Baidu Spending Billions In Online-To-Offline Push BIDU

China search leader Baidu (NASDAQ:BIDU) certainly didn’t waste any time finding ways to spend some of the proceeds from its recent bond offering.

On Tuesday, the company announced it would invest $3.2 billion over the next three years to bolster its offering of online-to-offline services by fortifying group-buying website Nuomi, which Baidu acquired for $160 million in 2014.

“I took a look yesterday, and right now Baidu has over 50 billion RMB ($8 billion) in cash on its books,” Baidu CEO Robin Li said in a press conference in Beijing. “We’re going to take 20 billion ($3.2 billion) of that and do Nuomi right.”

The online-to-offline e-commerce business model, or O2O, is designed to attract customers online, then direct them offline to physical stores and services.

Baidu also officially introduced Membership Plus, which integrates Nuomi’s membership program with a merchant’s own customer relationship management system through member-only prepaid cards, a payment-after-service option and other offerings.

Baidu says the strategy will help merchants in the network establish their own marketing platform, drive traffic to their sites or physical business locations and tap into Baidu’s huge user base.

Nuomi now operates in more than 330 cities across China and oversees 650,000 online stores, the company says. The company this year has tested Membership Plus in two key categories, restaurants and movie ticket purchases.

The new program will help Baidu compete in China’s burgeoning e-commerce arena vs. China e-commerce leader Alibaba (NYSE:BABA) and others. Alibaba is also investing heavily to develop its online-to-offline retail capability.

China’s e-commerce market is expected to grow at an annual rate of 25% over the next few years, from $390 billion in 2014 to $718 billion in 2017, according to a recent study released by management consulting firm AT Kearney.

Last week, Baidu announced it’s adding more than $1 billion to its war chest through a new bond offering as the company spends to grow in theChinese Internet market.

Baidu says it expects to receive $1.24 billion, after costs, from the bond offering, announced on June 23.

The public offering consists of $750 million of 3% notes due in 2020, the company says, along with $500 million of 4.125% notes due in 2025.

Baidu sold $1 billion in five-year bonds back in June 2014.

The company said it will use the net proceeds from its current offering for “general corporate purposes.”

Baidu was up a fraction in early afternoon trading in the stock market today, near 202. Alibaba stock was up 1%, near 82.

Follow Michele Chandler on Twitter:@IBD_MChandler.

Baidu Spending Billions In Online-To-Offline Push BIDU