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Baidu: A Pessimistic Outlook

Jul. 09, 2017 4:55 PM ETBaidu, Inc. (BIDU)17 Comments
Youce Ji profile picture
Youce Ji


  • In the recent years, Baidu has barely grown while its competitors such as Alibaba and Tencent are growing much faster.
  • Mobile applications are taking market shares and revenues away from Baidu's search engine.
  • Baidu does not have many advantages in AI, especially after Andrew Ng resigned. The future of AI remains uncertain.

For the past few years, Baidu (Nasdaq: NASDAQ:BIDU) has been considered one of the top three Chinese IT giants along with Alibaba (NYSE: BABA) and Tencent (OTCPK:TCEHY), which are collectively referred as “BAT”. However, Baidu’s recent performance has distanced itself from Alibaba and Tencent, which are growing at a much faster pace than Baidu. Meanwhile, mid-sized companies such as NetEase (Nasdaq: NTES), whose market capitalization is almost the same as Baidu, is catching up. I hold a pessimistic view of Baidu’s growth story, which is mostly based upon its AI technology whose future remains mostly unknown. In the meantime, Baidu’s only growing revenue source is iQiyi and its primary business, the search service, faces stagnation due to growing mobile end services.

Compared with Alibaba and Tencent, Baidu is becoming smaller in size and growing at a lower speed. People used to value Baidu, Alibaba and Tencent at the same level because they have the strongest presence in the Chinese technology industry. However, as of now, among “BAT”, the “A” and “T” operate much larger businesses than “B”:

(Source: FORBES)

As shown by the graph above, Tencent and Alibaba are one step away from the $300 billion market cap while Baidu is barely over $50 billion. More importantly, Tencent and Alibaba are demonstrating a lot more market presence due to their large user base. For example, “BAT” all offer mobile transaction services. Baidu has Baidu Wallet, Alibaba has Alipay, and Tencent has Weixin Pay and QQ Wallet. Nevertheless, most businesses in China only offer the Alipay and Weixin Pay as acceptable payment methods. In 2017 Q1, Baidu Wallet attained only 0.36% of the mobile payment market share. Baidu has spent a lot of effort in promoting this application by connecting it with other Baidu services such as

This article was written by

Youce Ji profile picture

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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