China’s Baidu, the country’s leading search engine for the last 20 years, announces its fourth quarter earnings at close of market on Thursday amid expectations profits will be down, as the country’s ad market faces headwinds.
But, as the FT reports, there may be more at play, as an increasing amount of the country’s internet is being put beyond the reach of Baidu’s search results by rivals in “walled gardens” of content.
Although still China’s third-biggest tech company by value, Baidu has been outperformed more recently by Tencent and Alibaba, particularly as more content moves onto social media platforms such as Tencent’s WeChat, and none of this content is captured by Baidu’s search engine.
Alibaba also prevents results from its Taobao online marketplace from being picked up by Baidu.
Baidu’s answer was to launch its own blog platform, Baijiahao; but this has also run into criticism over an online claim it prioritised its own content in search results.
“For Baidu these few years are difficult years,” Jialong Shi, an internet analyst for Nomura China, told the FT.
“Their current cash cow, the search engine business, is facing a structural issue: many users and contents and time are taken away by the super-apps, while their new revenue drive, AI, is still in a cultivation stage.”
So dominant while desktops were the key gateway to search, Baidu was able to hold its market position, including against Google. But the era of mobile search has proved a challenging transition.
The company became highly dependent on medical advertising, which accounted for 20% to 30% of revenues as recently as 2016, the year Baidu was hit by a scandal involving a young man who died after buying an experimental cancer drug through the platform. Regulators got involved and the brand was forced to drop 20% of its advertisers and issue a revenue warning, the FT reports.
Meanwhile the company has attempted to diversify revenue streams, venturing into building self-driving cars, selling cloud computing services, selling software licences and making products such as smart speakers.
But these are long-term plays, and, as the FT reports, there are concerns the brand is chasing too many targets and spending a lot of money to do it. Increased market spending, the FT says, is one reason Nomura and Goldman Sachs have cut their earnings estimates for 2018’s final quarter.
Sourced from the Financial Times