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Baidu: Pivoting Towards Long-Term AI Growth Opportunities

Mar. 02, 2021 9:00 AM ETBaidu, Inc. (BIDU)IQ11 Comments
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Khaveen Investments


  • Baidu is the leading search engine provider in China with almost three quarters of market share and derives the majority of its revenues from the booming digital ad market.
  • The company is seeking to diversify from digital ads as it is outpaced by Alibaba and Tencent which has gained share from the company.
  • It has ventured into the AI smart speaker market and attained a firm market leadership by leveraging its search engine capabilities.
  • It is also exploring the cloud market where it seeks to compete against Alibaba, Tencent and Huawei with a differentiated product offering based on AI capabilities as well as the nascent AV market with its Apollo AV software platform in partnership with major automakers and suppliers.

baidu logo

Source: Baidu

Baidu (NASDAQ:BIDU) is a Chinese Internet platform company best known as the leading search engine in China. The company has a market share of 74% of the search market handling 6 bln search queries per day. It derives the majority of revenues from its Baidu Core advertising segment which represents 62% of its revenues. Besides that, the company also has a strong presence in the Chinese video streaming market with iQIYI (IQ), one of the major video streaming providers in China with almost 105 mln paid subscribers.

Furthermore, Baidu is also seeking to diversify from these business segments by leveraging its search engine capabilities to explore the fields of AI with developments in AV, cloud and smart speaker devices. In cloud, the company is seeking to differentiate itself as a cloud AI-enabled solutions provider for consumers and enterprise with a suite of comprehensive product offerings for industry specific applications in big data and machine learning. Since the introduction of its low-cost smart speakers, the company has attained market leadership by leveraging its DuerOS intelligent voice assistant platform which harnesses the capabilities of its search engines. Moreover, the company is exploring the nascent AV market by partnering with major automakers and auto part suppliers to provide a comprehensive software suite for the development and commercialization of AV.

Digital Ad Market Growth Offset Market Share Erosion

Baidu derives the majority of its revenues from search and display ads from the Baidu Core platform. The platform features Baidu search plus feed, Baidu App, short video, knowledge & information products such as Baidu Knows, Baidu Wiki and Baidu Post. Through the Baidu platform, the company derives online advertising service revenues from search and display ads based on a pay-for-performance (P4P) model which entails that businesses may opt not to continue spending on ads if they are not performing up to expectation. This model is

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Khaveen Investments is a Global Macro Quantamental Hedge Fund managing a portfolio of globally diversified investments. We have interests in 100+ investments across multiple asset classes, countries, sectors and industries. Our investment approach takes both a top-down and bottom-up approach encompassing macro-economic, fundamental, and quantitative analysis. We serve accredited investors throughout the globe, which include HNW individuals, SMEs, associations, and institutions. Our investment managers have decades of investment experience between them, with research expertise in emerging technologies such as Artificial Intelligence, Cloud Computing, 5G, Autonomous & ElectricVehicles, FinTech, Augmented & Virtual Reality and the Internet of Things.www.khaveen.com

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