Following closely to expectations, Baidu Inc., China’s largest internet search engine, posted a 3 percent dip in its third-quarter revenue due to a weak advertising environment due to a weakened economy. However, the good news is that the American depositary shares of Baidu increased by about 1% in early trading on Thursday.
Accounting for 90% of Baidu’s revenues, online advertising sales fell by 4% and amounted to 18.8 billion yuan ($2.6 billion) for the quarter. This was fairly close to analysts’ estimates of 18.89 billion yuan. Also, a significant number of Baidu’s advertising clients are SMBs, meaning that the company faces significant risks in the face of economic downturns and declining consumer spending.
Baidu’s Initiatives that Neuter this Dip
Some of the proposed initiatives, such as artificial intelligence and autonomous driving, are already showing first fruits in Baidu. AI Cloud has emerged as the main driver that has helped to compensate for the declines in the advertising division. Also, the company’s AI called Ernie was used to handle 200 million queries in May, but currently, it manages 1.5 billion queries.
The recent few weeks have seen Baidu launch smart glasses and a no-code software development platform, with both relying on artificial intelligence to advance the company’s mission. It has also launched a paid version of the ‘Scatter’ chatbot, and taken Ernie to developers via its cloud services.
Financial & Competitor Analysis of Baidu
Total revenue for the three months to September of this year was 33.56 billion yuan ($4.64 billion), in line slightly above the average analyst estimate of 33.43 billion yuan. Net income rose 14 percent to 7.63 billion yuan, higher than the average estimate of 4.67 billion yuan.
However, some developments including Baidu, Wenxiaoyan (previously known as Ernie Bot), the mobile chatbot has been outcompeted by Doubao by ByteDance. Market data by SensorTower showed that Doubao reached 19.4 MDAU in October 2023, leaving behind Wenxiaoyan which had 3.8 MDAU.
Looking Ahead
While Baidu is currently facing a slowing economy, its emphasis on AI capabilities and new products and services beyond advertising point to its future growth opportunities. However, competition from other competitors such as ByteDance shows what lies ahead in terms of customer retention. This performance highlights the need for organizations to maintain continuing revenue models alongside reinvesting in newer technologies.
