Baidu announces today the acquisition of PPS (or PPStream), a peer-to-peer video service, for US$370 million. The latter will be merged into iQiyi, the online video service wholly owned by Baidu. Gong Yu, CEO of iQiyi, will be the CEO of the combined company, and Co-founders of PPS, Zhang Hongyu and Xu Weifeng, will be co-presidents.

Baidu claims the combined platform will be No. 1 in the Internet video industry in China in terms of user pool and view time.

Founded in 2005, PPS has cumulatively 500 million PCs installed with its software, with 100 million being active. And its mobile app installs reached 134 million as of February 2013, according to official data. Unlike most other Chinese video services who make revenues solely with advertising and haven’t turned a profit, PPS has been making considerable income through games, membership program, etc.

Before this acquisition, PPS raised four rounds of funding,  US$1 million from Ceyuan Ventures in 2005, US$10 million from Ceyuan and Qiming Ventures in 2007 and US$20 million from LB Investment, Ceyuan and Qiming in 2008. In 2011, PCCW bought US$28.6409 million worth of shares. The company once planned for IPO in 2011.

Update: In an interview after the announcement, Gong Yu, CEO of iQiyi, said they expected to take 30 days to integrate the companies as there were only 10% in overlap of employees and the services provided by the two companies were very different. It’s also disclosed that  it’s an all cash deal and all the investors and founders of PPS’s exit.

image: pps.tv