Tencent, one of China's biggest Internet companies, announced on February 19 that it will purchase a 20-percent stake in restaurant ratings and group-buying website Dianping for $400 million.

Competition has escalated among BAT, the acronym for China's three Internet giants (the other two being the leading search engine Baidu and e-commerce group Alibaba) as they seek growth through the expansion of O2O (online to offline) services.

On February 10, Alibaba offered $1.1 billion to acquire AutoNavi Holdings Ltd., making the Chinese digital mapping and navigation firm its wholly owned subsidiary. Given Alibaba's previous deals with group-buying website Meituan.com and taxi-calling app Kuaidi, analysts predict strong O2O performance from the company.

Baidu is expected to fare well too in the O2O sphere thanks to its alliance with Meituan's rival Nuomi.com and online app store 91 Wireless.

The deal between Tencent and Dianping is believed to benefit both companies as the former can reap more revenues from bricks and mortar stores while the latter will gain a wider public exposure due to Tencent's large user base, especially in its instant message app WeChat.