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Baidu, Inc. (BIDU)

Baidu aims to make the complicated world simpler through technology. They strive to achieve this mission through two-pillar strategy: strengthen mobile foundation and lead in artificial intelligence (AI).


Baidu business currently consists of two segments, Baidu Core and iQIYI.

Baidu Core primarily comprises (1) search plus feed, including Baidu App, short video products, and knowledge & information products, such as Baidu Knows, Baidu Wiki and Baidu Post, as well as online marketing services, which were describe as "mobile ecosystem,”and


(2) new AI businesses, such as DuerOS (voice assistant and smart devices), Baidu Cloud (AI solutions and cloud services) and Apollo (autonomous driving and smart transportation). iQIYI is an innovative market-leading online entertainment service provider in China. iQIYI’s platform features highly popular original content as well as a comprehensive library of other professionally-produced content, professional user generated content and user-generated content.


BIDU operations are primarily conducted in China, and revenues generated from China accounted for 98% of total revenues from 2017 to 2019.


Baidu Core – Mobile Ecosystem


Products and Services for Users


BIDU aspire to provide the best experience to users. To enrich user experience, they provide a broad range of products and services accessible through mobile devices, PCs and other smart devices. They offer search and other services on the Baidu platform that connect users to relevant information online, including web pages, news, images, documents, multimedia files, and services, through links provided on website, apps and skills store, as well as native-app like experiences via the Smart Mini Program.


Baidu App

BIDU flagship app enables users to access their search, feed and other services through mobile devices. Baidu App offers twin-engine search-plus-feed functions that leverage their AI-powered algorithms and deep user insight to offer users a compelling experience. It features improved feed display, short videos, Smart Mini Programs, enhanced voice input, text to speech and augmented reality search to better serve users of mobile devices. In December 2019, average DAUs of Baidu App reached 195 million, increasing 21% over the same period of 2018.

Baidu Search. Users can access search and other services through Baidu’s properties and Baidu Union partners’properties. In addition to text inputs, users can conduct AI-powered

voice search and visual search. Voice search integrates speech recognition and search technologies to enhance the user experience by providing a more natural and convenient input modality. Visual search enables the use of smart phone cameras to capture images and retrieve related content and services on the web. For example, users can take a photo of a plant or a pet to identify the species. BIDU also endeavor to improve the search experience, through other AI-powered products such as Top 1, to satisfy user queries with the first displayed search result, which they believe will be an important capability with the adoption of smart devices with smaller screens. In addition, BIDU offer vertical search to users, such as video search and online literature search.


Baidu Feed. Baidu Feed is a product within Baidu App that provides users with personalized timeline based on demographics and interests. Baidu Feed complements their core search product, leverages Baidu AI recommendation algorithms and monetization platform, and contributes to user engagement and retention, including content sharing, likes and comments. We also provide text-to-speech function for feeds to help users get hands free.


Short Video Apps


Haokan. Haokan is a short video app, offering a wide variety of user generated and professionally produced short videos, usually several minutes long, in coordination with multiple channel networks (MCNs). Haokan allows users to upload, view, search, rate, share, favorite, comment, and follow. Video content creators and curators can distribute their content to build a fan base and receive revenue share for their content contribution.


Quanmin. Quanmin is a flash video app for users to create and share short videos, usually less than one minute long, and live videos with entertainment orientation, such as musical, dance, comedy, acting and lip-sync. Users can shoot or upload flash videos and edit them with built-in special effects, filters and stickers. Contents are distributed in personalized timeline powered by Baidu AI recommendation algorithms.


Knowledge-and-Information Centric Products


Baidu Knows Baidu Knows is a question-and-answer community(like quora) where questions are asked, answered, and organized by our users. The answers posted on Baidu Knows are generated by their users, professionals, enterprises and governmental agencies. Baidu Knows also leverages Baidu’s search capabilities to help users find answers to their questions on the web fast and efficiently, and at the same time, various partners of Baidu Knows can reach their target users accurately.


Baidu Wiki (a.k.a. Baidu Encyclopedia). Baidu Wiki is a wiki, compiled by experts in specialized fields, featuring high-quality columns, such as Encyclopedia of Intangible Cultural Heritage, Digital Museum and Recorder of History, as well as a complete video-based knowledge source.


Baidu Healthcare Wiki Baidu Healthcare Wiki offers healthcare knowledge and information from authoritative and professional sources in text, video, picture, and Q&A formats.


Baidu Wenku Baidu Wenku hosts a library of digital documents, covering a wide range of content, such as education, architecture, law, internet and finance, shared in forms such as academic papers and PowerPoint presentations by professionals, enterprises, institutions and other users. Combined with Baidu Search’s capabilities, Baidu Wenku serves as an abundant resource to help users obtain high-quality study content and knowledge & information in a variety of topics efficiently.


Baidu Scholar Baidu Scholar is an academic search engine that provides literature retrieval functionality from massive Chinese and English academic resources including various academic journals and conference papers. Baidu Scholar also provides research tools such as plagiarism detection, journal search, and helps scholars efficiently find scholarly literature relevant to their academic topics.


Baidu Experience Baidu Experience is an online platform where users share daily knowledge and experience. At the aim of providing practical and high efficiency solutions, Baidu Experience covers multiple fields such as software, lifestyle tips, games, etc.


Baidu Post (a.k.a. Baidu Post Bar). Baidu Post is a social media built on topical online communities. Users can post text, image, audio and video content and reply to original curation, forming valuable discussion groups. Baidu Post draws new users through close integration with search and user generated content, and has been a popular platform for celebrity fans, online game players and online novel readers to build communities for topical discussions, especially about current cultural trends.


Products and Services for Customers

Online Marketing Services

BIDU deliver online marketing services to a diverse customer base consisting of SMEs, large domestic businesses and multinational companies across industries and geographical locations. The defined industries in which our customers operate include healthcare, education, retail/e-commerce, online game services, personal care, franchising, financial services, real estate and home furnishing sectors, and business services. Although their customers are located across China, they have a more active and larger customer base in the coastal regions, reflecting the current economic demographics in China.


Online marketing services enable the delivery of comprehensive, rich and diversified marketing offerings to fulfill customer needs. BIDU have made continuous improvements to the marketing services on their platform, including the following initiatives:


Video ads: BIDU promoted the monetization of video traffic in 2019, using diversified monetization products such as live streaming and short videos, equipped with video creative production tools, to provide customers with a richer and more effective brand communication medium.


oCPX: oCPX provides marketing customers with more options for lead generation. It enables customers to bid for online marketing services based on pre-defined results other than on a cost-per-click basis, such as on a cost-per-impression,cost-per-action or cost-per-view basis.


Action ads: Action ads comes in a wide range of ad formats, including click-to-call,

click-to-chat, click-to-download, and click-to-buy, to help marketing customers achieve better conversion.


Customer relationship management (CRM): By combining marketing automation and sales force automation functionalities, BIDU CRM service allows customers to effectively qualify and nurture marketing-generated leads and further convert them into orders, so as to streamline the ad-to-order processes and to increase the return of the ad spending.


Products and Services for Partners


BIDU attract numerous business partners, which help create opportunities for BIDU to work with them in research and development and other business cooperations and establish long term business relationships.


Baidu Union. Baidu Union consists of a large number of third-party websites and mobile apps. We match our customers’ promotional links to the properties of Baidu Union partners. Some Baidu Union partners also embed our products and services onto their properties. We allow Baidu Union partners to provide high-quality, relevant search results to their users without incurring the cost of development and maintenance for advanced search capabilities and monetize their traffic through revenue sharing arrangements with us. Baidu Union partners may use our content recommendation system to provide feed content and ads to their users.


Baijiahao (BJH Accounts) BIDU publisher network of 2.6 million BJH Accounts, aggregates news articles, photos, short videos, live videos and augmented reality clips from MCNs, media outlets, and other professional sources for distribution through our search, feed and short video products.


Smart Mini Program Smart Mini Programs are applets developed by their partners to share their content and services in Baidu App with native-app like experience. The number of smart phones sold in China is on a decline and app installation costs have been rising, causing app developers to take interest in offering their content and services through Baidu App. Smart Mini Program has become increasingly popular, as users can now search for content and services that were historically only available in apps, and saves users from having to download and maintain so many apps on their phones. Smart Mini Program was launched in July 2018, and its monthly active users reached 316 million in December 2019.


Managed Page Managed Page is an alternative for HTML site owners to use as the landing page for search results. Mobile site owners no longer need to purchase server, software and bandwidth to maintain a web presence. Instead, they can open an account on Baidu’s platform, use leverage their tools, services and AI to more efficiently reach and engage with users. Managed Page comes with industry-specific solutions and is designed to provide users with more reliable and secure information.


Baidu Core – New AI Businesses


BIDU new AI businesses comprise new business initiatives, including DuerOS (voice assistant and smart devices), Baidu Cloud (AI solutions and cloud services) and Apollo (autonomous driving and smart transportation). These businesses leverage Baidu AI on Baidu Brain, an internally developed AI platform.


DuerOS DuerOS is a leading voice assistant for the Chinese language, which is installed on Xiaodu smart home devices, smart phones, children smart watches and story machines. Equipped with over 3,600 skills in wide-ranging genres, including education, cooking, online games and live streaming, the DuerOS skills store enables Xiaodu smart speakers and smart display to offer so much more beyond listening to music and watching videos. Xiaodu smart display with upgraded DuerOS enables hand gesture control and full-duplex continued conversation (multi-round conversation without wake words) through eye gesture detection.


Baidu Cloud Baidu Cloud primarily provides AI solutions, cloud infrastructure and other services to enterprises and individuals. Our goal is to offer a comprehensive set of products, services and tools to enable enterprises and individuals to improve productivity and operational efficiency through the use of Baidu AI and cloud infrastructure. Baidu Cloud offers industry-specific AI solutions, serving sectors, including financial services, media, industrial goods, education, consumer goods and telecommunications, while supporting internal needs. BIDU also offer Baidu Drive(like Google drive, Baidu Drive currently has the largest cloud drive client base in China), which allows users to store and retrieve photos, videos, and other files on Baidu Cloud, along with other capabilities, such as group share and data transfer.


Apollo Apollo is a leader in autonomous driving in China, with over 177 OEMs, Tier 1 parts suppliers and other partners. Apollo supports third-party development through Apollo open platform, as well as the beginning of commercialization of autonomous driving and smart transportation. Apollo offers V2X solutions, the infrastructure backbone to smart transportation, to cities in China to help them improve municipal traffic condition, air pollution and road safety, using Baidu AI technology. In September 2019, Apollo's first robotaxi pilot program, leveraging Apollo’s V2X solution, was made available to the public in Changsha, Hunan, with an initial fleet of 45 autonomous driving vehicles.


Competition


For Baidu Core business, their primary competitors are mainly internet companies and online marketing platforms in China. BIDU compete with these entities for both users and customers on the basis of user traffic, quality (relevance), safety and user experience of search (and other marketing and advertising) results, availability and ease of use of products and services, the number of customers, distribution channels and the number of associated third-party websites. They also face competition from U.S.-based internet search providers providing Chinese language services and online marketing platforms, as well as traditional advertising media.


Online Marketing Platforms, Internet, Cloud and Smart Device Companies in China. Chinese internet companies, such as Alibaba, Tencent, ByteDance, Kuaishou, Sohu, Qihoo 360, Xiaomi and Huawei, offer a broad range of online services, including search, feed, cloud services and smart devices. These companies have widely recognized brand names in China and significant financial resources. Furthermore, some of these companies are private and are able to expend significant resources without consideration for near-term return on investment. BIDU compete with these internet companies primarily for user traffic, user time, content, advertising budget and marketing resources. BIDU leverage user traffic, product design and various marketing to enhance users’reliance on their platforms and services.


U.S.-based Internet Search Providers and Online Marketing Platforms.

U.S.-based internet search providers and online marketing platforms, such as Microsoft, Google and Facebook, have a strong global presence, well established brand names, more users and customers and significantly greater financial resources than they do. BIDU may also continue to face competition from other existing competitors and new entrants in the Chinese language search and online marketing market, cloud and smart devices.


Technology


BIDU established several research labs in China and the U.S. to enhance their research and development capabilities, and to focus on efficient data analysis, robotics and other areas. They have developed a proprietary technological infrastructure which consists of technologies for artificial intelligence, search, P4P and large-scale systems. Their established infrastructure serves as the backbone for our mobile, PC and AI platforms.


Artificial Intelligence (AI)

BIDU have been investing in AI for a number of years, particularly in the areas of natural language processing, knowledge graph, user understanding, speech technology, computer vision, augmented reality, data science and deep learning technology. Baidu AI powers our core businesses, including search and feed, DuerOS, Baidu Cloud and Apollo. Through Baidu AI Open Platform, we have opened up Baidu AI capabilities to third-party developers and provided them with tool kits on Baidu Cloud. We are also exploring ways to apply AI technologies and accelerate the commercialization of AI products and services.


Chips They are applying Baidu Kunlun, a high performance AI chip, which optimizes visual, speech, natural language processing and other AI capabilities, to power Baidu’s cloud servers. They also released an end-to-end far-field Automatic Speech Recognition (ASR) solution, based on in-house designed Baidu Honghu AI chip, for the use in DuerOS smart devices and in-vehicle infotainment.

Knowledge Graph Baidu AI consists of heterogeneous knowledge graphs of entity-graph, attention graphs, events, POIs, and industry-knowledge, which transforms immense multi-element and multi-modal data into a holistic semantic network containing hundreds of millions of nodes and hundreds of billions of relationships.


Computer Vision. Based on knowledge graphs, visual semantics allow the machine to understand videos from the perspective of a viewer and extract structured semantic knowledge by recognizing people, movements, items and associated time series. Visual understating has been applied widely in our video applications. With synthetic virtual image technology, including facial, limb and mouth shape generation, we have developed“virtual”customer representative, to be paired with our automated customer service cloud solutions, powered by Baidu Brain.


Search Technology

BIDU search is powered by a set of industry-leading technologies, including the following, among others:


Ranking They compare search queries with the content on web pages to help determine relevance. They have significantly improved the relevancy, freshness and authority of ranking using machine learning modules to analyze the rich internet and user interaction data and prioritize the search results. They have innovatively applied machine learning technology to better understand the semantics beyond simple text of the keywords inputted by users, allowing them to provide more relevant search results to users. Since 2013, they have applied deep learning in search ranking system, and such technology is playing an increasingly important role in search.


Video Search Video content is growing as an explosive trend in the ecosystem of Internet content. As a new general-purpose content format, video is more intuitive and easy to understand, and has a larger information capacity than graphic content. The next-generation general-purpose search (video search) is beginning to take shape. With deep learning algorithm being applied to video analytics, they are vigilant in providing the best video search experience to users.


Multimodal search

They greatly improved accuracy of speech recognition in scenarios such as long sentences, mixed Chinese and English, as well as strong accent, and thus significantly improving user satisfaction of our speech search. They built the terminal visual interaction engine V1.0 for visual search. They facilitated the implementation of several latest convolutional neural network (CNN) models in industry and significantly reduced training costs through unsupervised or semi-supervised models, leading the industry in user experience in multiple key scenes.


Web Crawling. Their powerful computer clusters and intelligent scheduling algorithms allow them to crawl web pages efficiently. They can easily scale up system to collect an ever-growing number of Chinese web pages. Their spider technology enables them to refresh web indices at different intervals and the index refresh frequency is set based on our knowledge of internet search users’needs and the nature of the information. They also mine multi-media and other format of content from web page repositories.


Financial Profile


BIDU recognise their revenue via:

1.Performance-based online marketing services:

Cost-per-click (“CPC”)


2.Other performance-based online marketing services:

Online display advertising services

Baidu Union online marketing services

Collection

Sales incentives

Membership services

Content distribution

Financial services

Cloud services

Sales of hardware


Total revenues in 2019 were RMB107.4 billion (US$15.4 billion), growing by 5% from 2018. In 2017 and 2018, They divested certain non-core businesses, including Baidu Deliveries, Du Xiaoman, and others. These divested businesses together generated RMB4.1 billion and RMB3.1 billion in revenues for the year ended December 31, 2017 and 2018, respectively. Operating profit in 2019 was RMB6.3 billion (US$906 million), a 59% decrease from 2018. Net income attributable to Baidu, Inc. in 2019 was RMB2.1 billion (US$296 million), a 93% decrease from 2018. Net income in 2019 included a non-cash impairment loss of RMB8.9 billion (US$1.3 billion) related to the write-down on their equity investment in Trip.com from an other-than-temporary decline.


BIDU total assets as of December 31, 2019 were RMB301.3 billion (US$43.3 billion), of which cash, cash equivalents and restricted cash amounted to RMB34.4 billion (US$4.9 billion). BIDU total liabilities as of December 31, 2019 were RMB128.5 billion (US$18.5 billion), accounting for 43% of total liabilities, redeemable non-controlling interest and equity. As of December 31, 2019, BIDU accumulated retained earnings were RMB126.3 billion (US$18.1 billion).




Operating profit. BIDU generated an operating profit of RMB6.3 billion (US$906 million) in 2019, a 59% decrease from RMB15.5 billion in 2018.


Net income attributable to Baidu, Inc.

Net income attributable to Baidu, Inc. decreased from RMB27.6 billion in 2018 to RMB2.1 billion (US$296 million) in 2019.



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