Text / Li Anqi

On the first day of March 2022, baidu released the financial results for the fourth quarter and the whole year of 2021.

In the fourth quarter of 2021, Baidu’s overall revenue increased, but its net profit fell sharply. Even so, the two major goals of revenue and net profit still exceeded market expectations. On March 2, the price of Baidu Hong Kong stock soared by 7%. After the opening, the stock price once rose by more than 9%. On the evening of March 1, the price of US stock rose by 6.8%.

According to the financial report data, Baidu’s total revenue in the fourth quarter of 2021 was 33.1 billion yuan, a year-on-year increase of 9%, and the net profit attributable to Baidu was 1.715 billion yuan, a year-on-year decrease of 67%.

Similarly, Baidu’s revenue in 2021 was 124.493 billion yuan, a year-on-year increase of 16%, but the net profit attributable to Baidu was 10.226 billion yuan, compared with 22.472 billion yuan in 2020, less than half of last year.

Take a closer look at the proportion of various businesses in Baidu’s financial report, and the revenue and profit growth of each sector can be described as “ice and fire”.

Among them, the advertising business, as Baidu’s basic business, ushered in the slowest growth in the fourth quarter of 2021, with revenue of 19.1 billion yuan, a year-on-year increase of 1%. In 2020, when revenue slowed down due to the epidemic, Baidu’s annual advertising revenue was 74 billion yuan - an increase of 12%.

On the other side of “ice and fire”, Baidu’s AI business, as an emerging growth engine, has achieved good performance.

Driven by smart cloud and other AI businesses, Baidu’s non advertising revenue in the fourth quarter was 6.9 billion yuan, a year-on-year increase of 63%. The annual total revenue was 21.2 billion yuan, an increase of 71% year-on-year.

In the environment of repeated epidemics and tightened regulatory environment, although Baidu said it had handed over an answer sheet of “steady growth”, the fatigue of its advertising business is still clearly visible. How to develop in the stock market in the future and speed up the breeding of AI business into a strong enough thigh are the problems faced by Baidu.

Advertising business may have a lower point

In the past two years, affected by the epidemic and regulatory policies, the advertising demand of games, education and other industries has plummeted. In the earnings call conference, Baidu chairman and CEO Robin Li also said that the first quarter growth in 2022 is not as good as the fourth quarter of last year, but if the epidemic does not deteriorate after the first quarter, the first quarter should be the lowest in 2022.

In other words, due to the impact of the general environment, Baidu’s advertising business is still facing many impacts in the beginning of 2022.

On the other hand, in the advertising market, the search advertising market represented by Baidu is being impacted by the live video advertising market. Tiktok, Kwai and other enterprises are constantly mining potential of the video live advertising market.

Therefore, baidu should consider how to tap the realization opportunities in the stock market of search advertising and develop the emerging live video advertising business.

In April 2021, Shen Shuan, executive vice president of Baidu group, put forward the strategic upgrading of mobile ecosystem service, which is intended to change the single role of “traffic distribution” of Baidu mobile search, but to solve multiple needs of users on the same platform.

In short, with the help of Baidu’s mobile ecological business and services, provide users with one-stop services, expand the scale of users and enhance stickiness. The more traffic the platform obtains, the more stable the basic advertising business is. It is understood that Baidu mobile ecological business includes Baidu app, smart applet, baijiahao, baidu live broadcast, good-looking video, baidu health, knowledge, etc.

The strategy seems to have achieved some results. In the annual financial report, Baidu said that in December 2021, the monthly life of Baidu app reached 622 million, a year-on-year increase of 14%, and the proportion of daily login users reached 82%. The revenue of Baidu hosting page (similar to the official website of enterprise mobile) accounted for more than 40% of the advertising revenue in the fourth quarter.

Baidu has also reached cooperation with mobile phone manufacturers vivo, oppo and Xiaomi to adopt Baidu’s applet framework in the built-in browser of mobile phone, which has also increased the number of daily active users of Baidu applet by nearly 20 million. Previously, baidu also acquired YY live broadcast under the happy gathering era, hoping to bring synergy benefits to its mobile ecosystem.

However, the process of strategic upgrading is also full of twists and turns. At the end of December 2021, baidu was exposed that more than 300 people in the game Department of the mobile ecological business group were almost all laid off, and 90% of the live broadcasting business was laid off. These businesses are considered “poor commercialization ability and spend more money”.

However, Robin Li said in the earnings call conference: in the future, we will consider how to further cash in the live broadcast, such as subscriptions.

It sounds that Baidu will continue to “toss” and explore the possibility of live broadcasting and other mobile ecological services through various investments. However, the current mobile Internet dividend myth is no longer, and the stock market competition is fierce. It remains to be seen whether the effect expected by Baidu can come.

The road of AI realization welcomes the dawn

With the transformation in recent years, baidu is trying to get rid of its strong dependence on advertising business and try to make smart cloud and smart driving business its new development engine.

In the first quarter of 2021 earnings call conference, Robin Li set a goal: with the growth of artificial intelligence business, Baidu’s non advertising revenue will exceed advertising revenue in the next three years.

At present, in terms of AI business, Baidu’s revenue sources are mainly Intelligent Cloud and intelligent driving.

For intelligent cloud, Baidu chief financial officer Luo Rong said in the earnings call conference, Baidu Intelligent Cloud revenue in the four quarter was 5 billion 200 million yuan, an increase of 60% over the same period, and the total revenue in 2021 was 15 billion 100 million yuan, an increase of 64% over the same period last year.

Compared with other domestic cloud service business performance, baidu still has a certain gap. Recently, Ali also released the fourth quarter financial report of 2021. Ali cloud revenue of 19 billion 539 million yuan, equivalent to Baidu Intelligent Cloud annual revenue.

In terms of AI cloud, Baidu intelligent cloud is doing well. According to IDC data, Baidu ranked first among AI public cloud service providers for five consecutive times. In other words, to overtake, AI cloud is one of the few Baidu smart cloud drivers.

At present, Baidu intelligent cloud will be landed in the fields of finance, manufacturing, medical treatment, industry, energy and so on. In the field of transportation, the number of cities covered by Baidu ace intelligent transportation signed tens of millions of orders in 2021 increased from 14 a year ago to 35.

As for intelligent driving, Robin Li once said in an internal letter that