Robin Li, Baidu’s billionaire founder
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Chinese search-engine operator Baidu, dubbed the Google of China, is betting big that smart machines will disrupt industry after industry. Of the $3 billion Baidu spent in research and development (R&D) over the past two-and-a-half years, the majority has gone to artificial intelligence (AI), says Wang Haifeng, the company’s vice president and head of the AI group.
In the past quarter alone, R&D expenses went up by 35 percent from a year ago, to $412 million, according to Baidu’s latest financial results. Like Google, Baidu wants to use the technology to refine its search algorithms, develop voice assistants, produce self-driving cars and build augmented-reality tools that may soon have broader applications in marketing, tourism and health care.
To Baidu, however, AI means more than frontier research. The company needs AI-enabled services to bring in new revenue, as its core online-advertising revenue faces mounting pressure from government restrictions, particularly in health care ads. What’s more, advertisers are flocking to ecommerce and social media platforms such as Tencent’s messaging app WeChat and Alibaba’s Taobao marketplace. According to consultancy eMarketer, Alibaba accounted for 29 percent of China’s $42 billion digital-advertising market in 2016, with Baidu’s share falling to 21 percent from 28 percent in 2015.
In the past quarter, Baidu’s operating profit declined by 9 percent to $291 million, after going down by 14 percent last year. Its other diversification efforts have produced mixed results. The company invested billions of dollars in online-to-offline services a few years ago, betting that it would earn healthy commission fees from cinemas, restaurants and other local services using its products to connect to nearby customers. But that plan didn’t gain much traction, as the Tencent-backed Meituan Dianping now holds 80 percent of this $100 billion-market, according to Beijing consultancy Analysys International. IQiyi, its online-video unit that just inked a streaming partnership with Netflix, remains popular but is facing rising content costs.
Baidu has amassed a 1,700-member AI team and built four research labs in China and Silicon Valley, with the second Silicon Valley lab ready to accommodate 150 scientists, the company announced in March. In January, it hired Lu Qi, a Microsoft veteran, as its president and chief operating officer overseeing Baidu’s AI research. The company has one advantage: Its online search app boasts 665 million monthly active users, whose behavioural patterns can be harnessed for deep learning, a branch of AI that teaches machines to learn by themselves. And because search encompasses so many different topics, Baidu has more diversified data tranches than other Chinese tech giants, says Wang Shengjin, a professor at China’s prestigious Tsinghua University.
Baidu has amassed a 1,700-member AI team and built four research labs in China and Silicon Valley
“ The age of the mobile internet is over. Future opportunities lie in artificial intelligence.
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(This story appears in the 21 July, 2017 issue of Forbes India. To visit our Archives, click here.)