Baidu, Inc. (Baidu) is a leading artificial intelligence (AI) company with strong Internet foundation.
The company is in the midst of a broad-based platform shift driven by generative AI and foundation models, that is set to revolutionize every industry. The company launched ERNIE Bot, its conversational AI bot powered by ERNIE, its in-house foundation model, in 2023. The company has used ERNIE Bot and ERNIE to reinvent its products and offerings in order to provide AI-native experiences. In Oc...
Baidu, Inc. (Baidu) is a leading artificial intelligence (AI) company with strong Internet foundation.
The company is in the midst of a broad-based platform shift driven by generative AI and foundation models, that is set to revolutionize every industry. The company launched ERNIE Bot, its conversational AI bot powered by ERNIE, its in-house foundation model, in 2023. The company has used ERNIE Bot and ERNIE to reinvent its products and offerings in order to provide AI-native experiences. In October 2023, the company launched ERNIE 4.0 (EB4), its most advanced foundation model.
The company is one of the very few companies in the world that offers a full AI stack of four layers, including cloud infrastructure, deep learning framework developed in-house, large language models and applications. The company’s technological innovation in AI has been well recognized by the global community. EB4, the company’s most advanced foundation model, is a GPT4-type of model, displaying human-level performance in understanding, content generation, complex reasoning and memory retention. These capabilities are crucial for developing AI-native applications and solutions. The company has put its leading AI into innovative use to reinvent its products and offerings and to create new ones. For example, the company is the first recipient of driverless licenses in China and the U.S. and it has been offering fully driverless ride-hailing services on open roads in Wuhan and Chongqing since August 2022.
For instance, the company’s natural language processing, an AI capability, enables the understanding of important details of a query, particularly in complex conversational queries. This helps optimize search results returned and increase the satisfaction rate of users. The company’s ability to continually invest heavily in research and development is made possible by the durable revenue that it generated as a leading Internet platform.
The PaddlePaddle developer community has grown to 10.7 million and has served 235,000 businesses, as of the end of 2023. Developers have created 860,000 models on PaddlePaddle by the end of 2023. The more developers and businesses use the company’s AI models, tool kits and services, the better its AI capabilities become, which in turn further increases the attractiveness of its business communities.
The company’s businesses span across an ecosystem of hundreds of millions of users, millions of developers and hundreds of thousands of enterprises. The company’s usage of a strong technology foundation to support an open platform business model not only draws participants into its ecosystem, but also adds richness and vibrancy to its ecosystem, strengthening the long-term prospect and vitality of its business overall.
Baidu Core mainly provides search-based, feed based, and other online marketing services, as well as products and services from new AI initiatives in the following three growth engines:
Mobile Ecosystem: A portfolio of over one dozen apps, including Baidu App, ERNIE Bot, which serves as a versatile, multi-round conversational AI assistant on both PC and mobile, Haokan and Baidu Post, which provides an open platform that aggregates a wide range of third-party, long-tail content and services through the company’s AI building blocks and which helps communities connect and share knowledge and information;
AI Cloud: Including enterprise and public sector cloud service, which offers a full suite of cloud services and solutions, including IaaS (infrastructure as a service), PaaS (platform as a service) and SaaS (software as a service), and is uniquely differentiated by the company’s AI solutions and personal cloud service; and
Intelligent Driving & Other Growth Initiatives: Consisting of intelligent driving, including Apollo Go autonomous ride-hailing services, Baidu Apollo’s auto solutions (Apollo Self-Driving Solutions and DuerOS for Auto) and intelligent electric vehicles under a joint venture, Jidu Auto, that the company established with Zhejiang Geely Holding Group (Geely), Xiaodu smart devices powered by DuerOS smart assistant, and AI chips.
At the core of its Mobile Ecosystem is Baidu App, which is the No. 1 search-plus-feed app in China with an MAU of 667 million in December 2023. Unlike most mobile apps, which direct traffic to a closed ecosystem, Baidu App aggregates content and services from third-party apps and websites by means of the company’s AI building blocks and directs traffic to third-party content and service providers with native-app like experience. Baidu App continues to grow the company’s huge offering of third-party content and services by leveraging its network partners of Baijiahao (BJH) Accounts, Smart Mini Program and Managed Page under an open-platform model. The company’s decade-long experience with AI and the development of a powerful knowledge graph allow it to match user intent with long-tail, third-party content and services on its open platform.
The company’s Mobile Ecosystem also includes a portfolio of over one dozen apps in addition to Baidu App, such as Haokan and Baidu Post, providing a platform for people to discover and consume information through search and feed and to interact and engage with creators, publishers, service providers and merchants. This native-app like experience from user acquisition to user relationship management to closed loop transactions demonstrates its value to merchants, enabling them to perform user life-time management on its platform, and has made Baidu App a leading online marketing services provider for both search and feed. Within its Mobile Ecosystem, the company serves more than half a million customers by enabling them to tap into its massive user base. The company generates revenue primarily from providing search, feed and other marketing services, which account for a majority of its total revenues in 2023. The company has made extensive use of AI technologies to develop innovative marketing services, such as dynamic ads, which recommend products from its marketing customers most fitting to each search user. The company’s marketing cloud also provides innovative AI capabilities to its marketing customers, so that users can still make product inquiries during non-business hours. In addition, the user engagement and user logins that have developed on its platform are enabling the company to diversify monetization beyond online marketing into other services, such as Baidu Health.
The company’s AI Cloud includes two parts: enterprise and public sector cloud, and personal cloud. The company’s enterprise and public sector cloud offers a full suite of cloud services and solutions, including IaaS, PaaS, and SaaS, and is differentiated by its AI capabilities. The company offers some integrated AI solutions for enterprises in China’s traditional industries and the public sector, helping them improve efficiency and productivity. The company’s solutions are specialized for certain use cases in traditional industries, including its quality inspection and patrol inspection solutions, ACE Smart Transportation and AI solutions for predicting water consumption and automatically adjusting water supply. Generative AI and foundation model have provided it with greater opportunities and strengthened its advantages in AI. The company helps enterprises train and fine-tune their customized models on its public cloud, and help them build AI applications, in particular, leveraging ERNIE API. The company’s cloud services cover various industries, including transportation, manufacturing, the public sector, energy and utilities, financial services, and internet/media.
Intelligent Driving & Other Growth Initiatives consists of promising businesses in development with huge market opportunities, and some are at early-stage commercialization with a growing customer base. The company is a market leader in intelligent driving and smart devices, and it is pursuing these large growth opportunities by leveraging its unique AI capabilities, data insights and internally developed chips. Apollo Go, which provides autonomous ride-hailing service, is open to the public in more than 10 cities in mainland China. In 2023, Apollo Go provided more than 3 million rides. The accumulated rides provided to the public by Apollo Go exceeded 5 million by January 2, 2024. In Beijing, Apollo Go has begun to charge fees for the autonomous ride-hailing services on open roads since November 25, 2021, and was granted the permits to charge fees for the driverless ride-hailing services on public roads on July 20, 2022, with no safety operator behind the steering wheel. Apollo Go received Beijing’s first license to test vehicles with no driver or safety operator in the car on December 30, 2022, and has charged fees since August 10, 2023, positioning Baidu as the first company to provide fully driverless ride-hailing service on public roads in the capital city. In Chongqing, Apollo Go has begun to charge fees for the autonomous ride-hailing services on open roads since February 18, 2022, and started offering fully driverless ride-hailing services on open roads and started charging passengers for fully driverless ride-hailing services on open roads on August 8, 2022. In Wuhan, Apollo Go started offering fully driverless ride-hailing services on open roads and received the permits to collect fees from the passengers on August 8, 2022. In the fourth quarter of 2023, the proportion of fully driverless orders within the overall order portfolio in Wuhan reached 45%. Apollo Go received permits to offer fully driverless ride-hailing services to the public in Shenzhen Pingshan in May 2023 and has been granted permission to provide fully driverless ride-hailing services to the public in four cities, including Beijing, Shenzhen, Wuhan and Chongqing. In addition, Apollo Go received permits to conduct fully driverless testing on open roads in Shanghai Pudong area in July 2023.
The company’s strong brand and market leadership in autonomous driving has been carried over to intelligent driving. Apollo is a well-recognized brand among automakers. The company has partnered with many domestic and global automakers to power their passenger vehicles with Baidu Apollo’s auto solutions.
Xiaodu ranked No.1 in smart display shipments and smart speaker shipments in China for the first nine months of 2023, according to IDC and Canalys. These initiatives will strengthen the company’s revenue drivers for long-term growth.
iQIYI produces, aggregates and distributes a wide variety of professionally produced content, as well as a broad spectrum of other video content, in a variety of formats.
The company has built a large and strong portfolio of products and services to give Baidu the scale necessary to invest heavily in technology, while optimizing its future for sustainable long-term growth. The company derives significant synergies by incorporating the AI developed for search into other parts of its business. For example, large daily use of the company’s visual search and voice search may be used to improve Apollo sensing capability and DuerOS speech recognition capabilities.
The company’s operations are primarily conducted in mainland China. For the year ended December 31, 2023, more than 97% of the company’s group’s total revenues were generated from mainland China, and as of December 31, 2023, more than 78% of its group’s total assets were based in mainland China.
Baidu Core
Baidu Core—Mobile Ecosystem
Baidu Mobile Ecosystem provides a platform for people to discover and consume information through search and feed and facilitate interaction and engagement among users, creators, service providers, and merchants, alike. In particular, the company’s ecosystem allows merchants, creators, publishers and service providers to acquire users, interact with users by provide information, content, products and services, and transact with users. This marketing funnel approach from user acquisition to user engagement to monetization demonstrates the company’s value to merchants, allowing them to build a life-time relationship of users. In addition, this platform-centric approach has enabled the company’s Mobile Ecosystem to start diversifying commercialization beyond online marketing into other services.
Products and Services for Users
Baidu App: The company’s flagship app enables users to access its search, feed, content and other services through mobile devices. Baidu App offers twin-engine search and feed functions that leverage the company’s AI-powered algorithms and deep user insight to offer users a compelling experience. Through the building blocks of BJH accounts, Smart Mini Program and Managed Page, Baidu App provides users with single log-on, native-app-like experience to a wide range of information and services dispersed across isolated mobile apps and HTML5 websites, as well as merchants a full suite of marketing cloud services. Baidu App’s spanning mobile ecosystem has resulted in more users logging in. In December 2023, MAUs of Baidu App reached 667 million.
Baidu Search: Users can access the company’s 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 internet. For example, users can take a photo of a plant or a pet, to identify the species. The company also endeavors 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 will be an important capability with the adoption of smart devices with smaller screens. In addition, the company offers vertical search, such as video search and online literature search to its users.
Baidu Feed: Baidu Feed provides users with personalized timeline based on their demographics and interests. Baidu Feed complements the company’s core search product, leverages Baidu AI recommendation algorithms and monetization platform, and contributes to user engagement and retention, including content sharing, likes, and comments. Baidu Feed provides text-to-speech function to help users consume internet content hands free, as well as leverages its large traffic to distribute video content from Baijiahao, Haokan, iQIYI and third parties.
Baidu Health: Baidu Health helps users find the doctor and hospital that best suit their different healthcare needs through the company’s AI building blocks. By doing so, Baidu Health provides doctors and hospitals more efficient online presence through Baidu Healthcare Wiki short-term videos, live streaming seminars and telemedicine, as well as providing them with hosted management tools to remain in contact with their patients efficiently, such as messaging, appointment, re-scheduling and monitoring of treatment plans.
Haokan: Haokan offers a wide variety of user generated and professionally produced short videos, usually several minutes long, in coordination with MCNs (multiple channel network). Haokan allows users to upload, view, search, rate, share, favorite, comment, and follow. Video creators and curators can distribute their content to build a fan base and receive revenue share for their content contribution.
Internally Developed Knowledge-and-Information-Centric Products: The company’s content and services ecosystem also includes a comprehensive portfolio of knowledge and information products developed internally, in partnership with professionals, reputable organizations and other users. For example, the company provided live streaming content from healthcare industry experts in 2020, to help users better understand and cope with the COVID-19 pandemic.
Baidu Wiki: A leading wiki in China compiled by experts in specialized fields featuring high-quality columns and videos, such as Encyclopedia of Intangible Cultural Heritage, Digital Museum and Recorder of History.
Baidu Knows: An online community where users can pose questions to other users, such as individuals, professionals, and enterprises. Baidu Knows leverages Baidu’s search capabilities to help users find answers to their questions on the internet fast and efficiently, while at the same time allow various partners of Baidu Knows to engage with their targeted users.
Baidu Experience: An online platform where users share daily knowledge and experience, providing practical tips and interesting perspectives in areas, such as software, lifestyle, and games, etc.
Baidu Post: 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 share topical discussions, especially about current trends.
ERNIE Bot: The company’s new AI-native product, serves as a versatile, multi-round conversational AI assistant on both PC and mobile. Starting from November 1, 2023, EB4 has been open to the public through ERNIE Bot at a subscription fee. This marks the company as the first company in China to implement user charges, distinguishing it from other models in the market.
Products and Services for Partners
The company attracts numerous partners to its platform through its AI building blocks and Baidu Union, which help create opportunities for it to work with its partners in research and development and other business cooperation and establish long term business relationships.
AI Building Blocks: To help app developers and website owners grow their business and leverage their traffic more efficiently with AI-powered tools and capabilities, the company offers Smart Mini Program and Managed Page to its partners, respectively. The company also offers BJH accounts to enable content providers to place their content on its publisher network and make their content searchable.
Baijiahao (BJH Accounts): The company’s publisher network aggregates articles, photos, short videos, live videos, and augmented reality clips from MCNs, media outlets, and other professional sources, for distribution through search, feed, and short video products.
Smart Mini Program (SMP): App developers may share their content and services in Baidu App with native-app like experience through increasingly popular applets, known as Smart Mini Program. Users can search for and access content and services that historically were only available in standalone apps within Baidu App, without having to download and maintain so many apps on their phones.
Managed Page: Managed Page is a hosted mobile alternative for website owners. Site owners may open an account on the company’s platform, use its tools and services powered by AI and engage with users without having to maintain their own site and pay for server, software and bandwidth costs. Managed Page comes with industry-specific templates and is designed to provide users with more reliable and secure information. Managed Page reached 51% of Baidu Core 2023 online marketing revenue.
Baidu Union: The company matches the promotional links of its online marketing services customers to the online properties of Baidu Union partners, which consists of a large number of partners, such as third-party websites, wap sites and mobile apps. Some Baidu Union partners, such as online portal websites and internet cafes, also embed its products and services, such as Baidu Search or a search function powered by Baidu Search, onto their online properties, which allows 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 it. Baidu Union partners may use the company’s content recommendation system to provide feed content and ads to their users. The company typically pays its Baidu Union partners a portion of the online marketing revenues based on pre-arranged agreements.
In addition, the company enters into arrangements with Baidu Union partners to provide its search engine in their browsers. The company typically pays such Baidu Union partners a fee based on prearranged agreements.
Products and Services for Customers
The company delivers online marketing services through its network of third-party agents and its direct sales team to a diverse customer base consisting of SMEs across industries, including healthcare, retail, e-commerce, entertainment and media, online games, business services, life services, and transportation. In 2023, the company served around half a million enterprise customers, who are customers of its online marketing services.
The company’s online marketing services enable the delivery of comprehensive, rich, and diversified marketing offerings to fulfill customer needs. The company’s online marketing services include P4P (pay for performance) services and others. The company generates revenues primarily from the sale of P4P online marketing services and other marketing services to its customers.
P4P: The company’s P4P services allow customers to bid for priority placement of paid sponsored links and reach users who search for information related to their products or services. The company charges its customers on a cost-per-click basis. Customers may choose to purchase search, feed and other online marketing services and has the option to set daily allowances. As its partners adopt Smart Mini Programs and Managed Page, some of them have begun to use these properties as their landing page, in lieu of their own mobile apps and websites.
Search marketing services are mainly provided to customers through the company’s proprietary online marketing system which drives monetization efficiency by improving relevance in paid search and optimizing value for its customers.
Feed marketing services usually comprise image-based or video-based advertising, appearing between the feed headlines or within the feed content. It is powered by Baidu AI in order to better match goods and services providers with their targeted audience while optimizing user experience.
Others: The company’s other marketing services comprise display-based marketing services and other online marketing services based on performance criteria other than cost per click (CPC). Customers can choose different mix of the company’s service offerings to optimize their return on investment. Brand Zone allows customers to display integrated text, logo, image, and video in a structured and uniform manner on a prominent position of the search result page or in vertical search products, such as Baidu Knows. Programmatic marketing platform supports the placement of advertisement using standard, intelligent, or customized creativity, different purchasing methods (guaranteed delivery or real time bidding), and multiple payment methods.
Marketing Cloud Platform: The company’s marketing cloud platform integrates one-stop-shop media purchase with CRM (client relationship management) functionalities, to allow its customers to purchase brand and performance-based marketing services, build audience and user engagement, generate leads and maintain relationships with users, leveraging tools and services powered by Baidu AI. The company’s marketing cloud platform helps it better understand its customers’ needs and enables its customers to leverage Baidu’s AI to simplify their marketing process and improve the effectiveness of their marketing efforts.
The company’s Mobile Ecosystem, built upon Baidu App, as well as a dozen other apps, offers a wide range of third-party content and services to hundreds of millions of users, typically free of charge. The company’s AI building blocks and other products and services for partners have attracted millions of partners to become participants in its Mobile Ecosystem and generate content and services onto its platform and to tap into its over-half-a-billion user base.
For its Mobile Ecosystem business, the company generates a substantial majority of its revenues from the provision of online marketing services to its customers through both direct sales and third-party agents. The company charges its customers periodically based on usage while requiring certain customers to pay a deposit. The company also offers certain customers credit terms. In addition to offering ads on its platform, the company serves promotional ads from its customers on the apps or website properties of Baidu Union partners. The company also powers the search engines of Baidu Union partners.
Baidu Core—AI Cloud
The company’s AI Cloud includes two parts: enterprise and public sector cloud, and personal cloud. The company’s enterprise and public sector cloud offers a full suite of cloud services and solutions, including IaaS, PaaS and SaaS, and is differentiated by its AI capabilities. Enterprises and the public sector have been the growth engine for the cloud revenue. Combined with the company’s effective marketing capabilities, it has been able to demonstrate the ability to cross-sell and up-sell additional products and services to existing customers, which in turn enables it to more efficiently grow its cloud business.
The company’s IaaS provides its customers the flexibility to quickly scale or cut back on their cloud computing needs without having to provide huge capital layout upfront. The company’s IaaS business benefited from multi-cloud strategies adopted by many of its customers.
The company also provides enterprise customers with cloud solutions, usually consisting of PaaS and SaaS, that leverage the unique AI capabilities. For example, the company enabled a client in the manufacturing sector to automate quality assurance checkpoints on its production line by leveraging its computer vision capabilities.
In the transportation industry, the company is a pioneer and industry leader in developing V2X (vehicle-to-everything) 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 2023, the company experienced weak demand in smart transportation projects due to a challenging macro environment.
The industry know-how from the company’s existing businesses, such as its Mobile Ecosystem and iQIYI, also provides valuable insights on how to tailor AI Cloud solutions to customers in the technology and media industries.
For the personal cloud, the company offers Baidu Drive, which allows users to store and retrieve photos, videos, and other files on AI Cloud, along with other capabilities, such as group share and data transfer. Personal cloud service contributed a small portion of total cloud revenues.
For AI Cloud, the company generates revenue by providing cloud services and solutions to enterprise clients, consumers and the public sector directly or through solution integrators for a lump-sum fee or on a subscription basis.
Baidu Core—Intelligent Driving & Other Growth Initiatives
Intelligent Driving & Other Growth Initiatives include developments with large total addressable markets and earlier-stage commercialization with a growing customer base, including Apollo intelligent driving and DuerOS smart assistant.
Intelligent Driving
Intelligent driving, including Apollo Go robotaxi fleets (autonomous ride-hailing service), Baidu Apollo auto solutions (Apollo Self-Driving Services and DuerOS for Auto) and intelligent EVs, leverage AI and other technologies to make a vehicle, or fleet of vehicles, more intelligent, all with the ultimate goal to be autonomous.
The company is the market leader in autonomous driving in China in terms of number of rides Apollo Go completed. The industry definition for L4 autonomous driving is that the vehicles are capable to drive themselves without human interactions but will be restricted to known use cases, or in most environments and road conditions. Apollo Go has already received permits for providing driverless ride-hailing services on open roads and received the permits to collect fees from the passengers in Beijing, Shenzhen, Wuhan and Chongqing. A well-known research firm, names Apollo as one of the four global leaders in autonomous driving, recognizing it as the top-tier autonomous driving company from China.
In addition, the services and solutions of intelligent driving are compatible with the company’s smart transportation solutions, which leverage each other to gain a better understanding of traffic and road conditions. The company’s leadership in autonomous driving, industry know-how, operating experience, transportation ecosystem understanding (from its smart transportation projects and maps), and gives it strong competitive advantages in leading the development of the intelligent driving industry.
Apollo Go, the company’s robotaxi. Robotaxi fleet operation represents a massive opportunity. Apollo Go is available in more than 10 cities, including all the tier-1 cities (Beijing, Shanghai, Guangzhou, Shenzhen) and other major cities. Luobokuaipao, the mobile application of Apollo Go, is available for free download from all the major app stores in China. In 2023, Apollo Go provided more than 3 million rides. The accumulated rides provided to the public by Apollo Go exceeded 5 million by January 2, 2024.
In Beijing, Apollo Go has begun to charge fees for the autonomous ride-hailing services (with a safety operator behind the steering wheel) on open roads since November 25, 2021, and Apollo Go was granted the permits to charge fees for the driverless ride-hailing services (with a safety operator in the vehicles, but not behind the steering wheel) on public roads on July 20, 2022. On December 30, 2022, Apollo Go received Beijing’s first license to test vehicles with no driver or safety operator in the car. In Wuhan and Chongqing, Apollo Go started offering fully driverless ride-hailing services on open roads and received the permits to collect fees from the passengers on August 8, 2022. In the fourth quarter of 2023, the proportion of fully driverless orders within the overall order portfolio in Wuhan reached 45%, up from 40% in the third quarter of 2023.
Apollo Go also received permission to offer fully driverless ride-hailing services to the public in Shenzhen Pingshan area in the second quarter of 2023. Apollo Go has been granted permission to provide fully driverless ride-hailing services to the public in four cities, Beijing, Shenzhen, Wuhan and Chongqing. Apollo Go received permits to conduct fully driverless testing on open roads in Shanghai Pudong area in July 2023.
In June 2021, the company introduced Apollo Moon, its 5th generation Apollo robotaxi vehicle. In July 2022, the company unveiled its 6th generation robotaxi vehicle Apollo RT6. RT6 is the first steering wheel-free, all electric model designed for fully driverless autonomous driving. Apollo RT6 is distinct from the previous generations that had otherwise been retrofitted on conventional vehicles.
Baidu established the Technology Ethics Committee in October 2023 to guide the practices of technology professionals.
Baidu Apollo’s auto solutions (Apollo Self-Driving Services and DuerOS for Auto). The company has been investing in autonomous driving technology to provide automakers with self-driving services. Under Apollo Self-Driving, the company offers HD Map, AVP (automated valet parking) and ANP (Apollo navigation pilot). The company introduced AVP (its automated valet parking) services in 2018, which allow a driver to get out of the car upon arrival at his or her destination and its solution would enable the vehicle to autopark, and to direct the vehicle to automatically drive to driver’s location out of the parking lot. In December 2020, the company introduced ANP (Apollo navigation pilot) services, which leverage its autonomous driving capabilities. In the past years, Baidu Apollo’s auto solutions continued to gain traction among leading automakers. These products are in the early stage of monetization and their revenue contribution is insignificant.
Baidu Maps: A voice-enabled mobile app providing users with travel-related services, including POI (point of interest) search, route planning, precise navigation, taxi-hailing service and real-time traffic condition information. Baidu Maps also provides professional and stable map services to business partners across different sectors. In 2022, the company integrated Baidu Map into its Intelligent Driving Group to create synergies between the Baidu Map app and the map solutions for the auto and transportation industries.
Intelligent EVs: The company entered into a strategic partnership with Geely in January 2021 to form a new EV company JIDU. The company provides intelligent driving capabilities, voice control system, cloud service and other AI related technologies to upgrade the passenger vehicles, and Geely, which holds the distinction of one of the best-selling Chinese automobile brands in past years, contributes its expertise in automobile engineering and manufacturing.
Other Growth Initiatives
DuerOS Smart Assistant: DuerOS is a leading smart assistant for the Chinese language, which powers first-party Xiaodu home smart devices as well as third-party smart phones, children smart watches, smart TVs and smart cars. DuerOS is differentiated by its multi-round conversation AI capabilities, leveraging internally designed Baidu Honghu AI chip, as well as by DuerOS skills store, which offers thousands of skills in wide ranging genres, including short and long videos, online games, education services, video conferencing and other visually oriented activities. In August 2021 and September 2022, Xiaodu completed two rounds of Series B financing at a valuation of US$5.1 billion with us retaining super-majority shareholding. While the company generates revenue primarily from the sale of its smart assistant devices to its customers directly and through its distribution network, Xiaodu services revenue, such as membership and advertising, already surpassed 15% of Xiaodu revenues. Xiaodu ranked No.1 in smart display shipments and smart speaker shipments in China for the first nine months of 2023, according to IDC and Canalys.
iQIYI
iQIYI is a leading provider of online entertainment video services in China. iQIYI’s platform features a variety of premium video content, in particular iQIYI original dramas and shows. iQIYI also expands its premium content offering through licenses and collaboration with third-party partners, which supplement its original content. As of December 31, 2023, iQIYI had over 40,000 professionally produced content titles in iQIYI’s comprehensive and diversified video content library, comprised of drama series, variety shows, films and others.
Since the beginning, iQIYI has always put content and users at the center, orienting each of its business strategies around delivering superior content quality and user-friendliness. Artistically crafted and imbued with industry expertise distilled from over a decade of operational experience, many iQIYI original titles have secured their places among the most successful IP franchises in the history of Chinese popular entertainment. Designed and refined by its engineers with a deep understanding of the evolving user preferences, iQIYI’s products continue to offer superior entertainment experience for users. With in-house studios spearheading its original content production, iQIYI is home to many acclaimed original drama series and variety show franchises, and has successfully serialized iQIYI’s original content into blockbuster sequels to accumulate and amplify IP value over time.
Professionally Produced Content
iQIYI Original Content
iQIYI’s original content includes content produced in-house and content produced in collaboration with quality third-party partners. iQIYI has a diversified portfolio that includes:
original dramas, such as The Knockout, Destined and Story of Kunning Palace, which were launched in 2023 and broke its internal 10,000 iQIYI popularity index score;
variety shows, such as The Big Band, The Detectives’ Adventures, The Rap of China, Super Sketch Show and innovative new IP, Become A Farmer;
movies, such as Tough Out, Break Through the Darkness, Northeastern Bro, The Comeback and Wolf Hiding; and
animations, such as Deer Squad, The World of Fantasy, Love Between Fairy and Devil and The Great Ruler.
iQIYI obtains the IP through production, adaptation or purchase from third parties, while the partners, typically established entertainment production companies, are responsible for content development and production. iQIYI maintains a high degree of control during the content development and production process.
iQIYI also adapts high-quality video IP into multiple entertainment products, such as online games, animations, online literature, and derivative merchandise.
Licensed Content
In addition to original content, iQIYI provides users with a selection of high-quality professionally produced content that is produced by and licensed from third parties. Leveraging iQIYI’s expertise in content selection, iQIYI has successfully debuted well-received titles, such as the drama series iPartment, In the Name of People, Go Go Squid, My Heroic Husband, A Lifelong Journey, A Journey to Love and the variety show Keep Running. iQIYI’s licensed content library also features a rich collection of movies, animations, documentaries and other content.
iQIYI licensed video content is typically procured from third parties at fixed rates for a specified term. The average term of licenses varies depending on the type of content, with films having an average term of 11 years and drama series an average term of 14 years. Payments of licensing fees are generally made in installments upon signing of the contacts and during the license period. iQIYI also exchanges rights to distribute licensed content with other online video streaming services to enrich its content library. In certain cases, iQIYI has the right of first refusal to purchase new content produced by the licensor.
iQIYI leverages its content procurement team’s insights and its AI-based big data analytics capabilities to optimize content procurement. iQIYI has established strong partnerships with content providers to ensure access to high-quality content. These partners include leading domestic drama series production companies, film production companies and TV stations, Big Five Hollywood production studios, and top TV networks in the U.S.
Other Video Content. iQIYI offers a broad base of other video content with all kinds of genres, formats, and running times, such as internet movies and dramas, mini variety shows and animations, and vertical or horizontal videos, as well as grassroot or influencer uploaded videos, edited video clips, and video blogs, or Vlogs, among others. iQIYI’s other video content expands its library and allows it to capture a broader user base, drive user engagement and enhance user stickiness.
iQIYI generates revenues primarily through membership services, online advertising and content distribution. iQIYI also generates revenues from other monetization methods, including online games, IP licensing, talent agency, online literature and other licensing.
Membership Services: iQIYI’s membership services generally provide subscribing members with a superior entertainment experience that is embodied in various membership privileges. iQIYI’s membership program is composed of multiple packages, each offered at a different price, and provides subscribing members with access to a large collection of content consists of drama series, movies, animations, cartoons and online literature, earlier access to certain content aired on the iQIYI platform and a bundle of viewing functions and features. iQIYI’s members primarily include subscribing members and, to a lesser extent, users who gain access to the company’s premium content library through paid video-on-demand service.
Online Advertising: The prices of iQIYI’s advertising services depend upon various factors, including form and size of the advertising, level of sponsorship, popularity of the content or event in which the advertisements will be placed, and specific targeting requirements. iQIYI offers both brand advertising service and performance-based advertising service.
Content Distribution: iQIYI sub-licenses content within its authorized scope to TV stations and other internet video streaming services. iQIYI also enters into barter agreements to exchange internet broadcasting rights of licensed content with other internet video streaming services. The barter agreement provides the licensee with the right to broadcast the licensed content, and the licensor retains the right to continue broadcasting and/or sub-licensing the exchanged content. The company distributes its selected content not only to third-party platforms in mainland China but also to regions outside of China. iQIYI also distributes theatrical movies invested by iQIYI to offline movie theaters.
Others: Other monetization models include online games, IP licensing, talent agency, online literature, other licensing and others.
Technology
The company focuses on technology and innovation. To stay at the forefront of the internet industry and to achieve long-term growth and success, it invests heavily in research and development. The company has established several research labs in China and the United States, to enhance its research and development capabilities, including AI, quantum computing and other areas.
Baidu AI
The company has been investing in AI since 2010, and it has opened up its AI platform to a large community of developers, which helps improve its AI capabilities and accelerate large-scale implementation of its AI. By doing so, the company is turning the world’s most advanced AI capabilities into platforms for customers, developers and partners.
The company’s AI capabilities consist of four layers and one module, as follows:
a foundation layer, consisting of PaddlePaddle, the company’s open source deep learning framework and platform, as software, Kunlun AI chips as hardware and databases as fuel;
a perception layer, aggregating internally developed algorithms for speech recognition and synthesis, computer vision and augmented reality & virtual reality;
a cognition layer, consisting of algorithms for natural language processing and knowledge graph; and
a platform layer, opening the company’s technologies to partners and developers to develop a strong AI ecosystem.
AI Capabilities. In 2022, Baidu released ERNIE 3.0 Titan, a pre-training language model with 260 billion parameters. ERNIE 3.0 Titan is trained on a vast knowledge graph and massive unstructured data.
Baidu released ERNIE Bot, the company’s conversational AI bot powered by ERNIE, its in-house foundation model in the first quarter of 2023. This launch demonstrated the company’s significant investments and achievements in AI over the past ten years. In 2023, Baidu continued to upgrade ERNIE. Baidu launched ERNIE 3.5 in May 2023 and launched ERNIE 4.0 (EB4) in October 2023. According to IDC’s latest report on the technological abilities of AI models, issued in July 2023, ERNIE 3.5 excels in many areas, such as algorithm, industry coverage, developer tools and ecosystem. EB4 is a GPT4-type of model, displaying human-level performance in understanding, content generation, complex reasoning and memory retention. These capabilities are crucial for developing AI-native applications and solutions. Baidu’s ERNIE 3.5 and EB4 have been accessible to users on the ERNIE Bot app. In addition, enterprise customers can use ERNIE 3.5 and EB4 via the company’s cloud API and web-based product.
In terms of software and hardware integration, Baidu independently developed AI chip, Baidu Kunlun, optimized for voice, natural language processing, image and other AI technologies, is capable of supporting deep learning frameworks, such as PaddlePaddle, and flexibly supports training and prediction, making AI models more efficient in computing and within the application. In addition, the Baidu Honghu chip was developed for far-field voice interaction, making voice interaction between people and cars, smart homes and other devices easier and more fluent. Separately, Baidu also works with partners to build hardware ecology. As of December 31, 2023, PaddlePaddle has been equipped with more than 50 chips.
PaddlePaddle: PaddlePaddle is Baidu’s deep learning framework developed in-house, which the company open-sourced in 2016. PaddlePaddle aims to solve a real problem for the public service sector and traditional industries, and enables developers to implement AI technologies efficiently. PaddlePaddle provides: a deep learning framework based on programming logic enabling both development flexibility and stability; the ultra-large-scale training capacity for real-time updates of trillion-level parameters of deep learning models; end-to-end deployment of high-performance inference engines designed for diverse platforms and devices; and open-source industry-grade models covering a wide range of applications. PaddlePaddle has boosted the diversification and scaling of AI applications. As of the end of 2023, PaddlePaddle developer community grew to 10.7 million and serves over 235,000 businesses. Developers, academic institutes, enterprises, government administrations and hardware OEMs works together on PaddlePaddle, allowing PaddlePaddle to cultivate various industry models. As a result, PaddlePaddle is well capable to run through the entire AI industry chain, from hardware adaptation to model training, inference deployment and application, consolidating the foundation of industrial intelligence and accelerating the pace of intelligent upgrading. In addition, Baidu has partnered with academics and industry to develop AI talents. EasyDL and BML (a full-featured AI development platform) are PaddlePaddle’s enterprise versions.
AI Chips. Baidu AI Chip, which was introduced in 2018, is a cloud-to-edge AI chip specifically designed for Baidu’s computing environment. As of December 31, 2023, both Baidu AI Chip I and Baidu AI Chip II have been in mass production. Baidu AI chips have been used for the company’s search engine, cloud, and Xiaodu’s business needs, while powering the company’s deep learning computing needs. For example, the Baidu AI Chip II optimizes the company’s AI technologies such as voice, natural language processing and images and support deep learning frameworks such as Baidu’s open source deep learning platform, PaddlePaddle. The diverse range of uses enables Baidu AI Chip II to power different AI applications, such as internet core algorithms, smart cities and smart industry. Furthermore, Baidu AI Chip optimizes the company’s AI capabilities on AI Cloud servers while improving cost efficiency.
The company has also developed a proprietary technological infrastructure, which consists of technologies for search, marketing services, and large-scale systems. The company’s established infrastructure serves as the backbone for AI, mobile and PC platforms.
Mobile Ecosystem Technologies
Search Technologies
The company’s search is powered by a set of industry-leading technologies, including the following, among others:
Ranking: The company compares search queries with the content on web pages to help determine relevance. The company has significantly improved the relevancy, freshness and authority of ranking using its machine learning modules to analyze the rich content on the internet and user intent, to prioritize the search results. The company began using machine learning in 2010, to better understand the semantics beyond simple text of the search keywords, and in 2013, it began to apply deep learning in its search ranking system, which is playing an increasingly important role.
Multi-Modal Search: The company has greatly improved the accuracy of speech recognition in scenarios, such as long sentences, mixed Chinese and English, and strong accent, and thus significantly improve user satisfaction of its speech search.
Marketing Services Technologies: The company’s marketing services platform serves billions of relevant, targeted sponsored links each day based on search terms users enter or content they view on web pages or in its apps. The company’s key marketing services technologies include Phoenix Nest, a web-based auction system to enable customers to bid for keywords and automatically deliver relevant, targeted promotional links on Baidu’s properties and Baidu Union partners’ properties. Designed to generate more relevant results, Phoenix Nest helps customers to identify popular keywords and provides them with tools for budget management and marketing effectiveness measurement.
Large-Scale Systems and Technologies: The company’s large scale and massive amounts of user traffic require its systems to efficiently and effectively allocate resources among the products and services in its large product portfolio. The company’s key large-scale systems and technologies include its internally developed automated management platform for large size clusters, which enables it to intelligently manage and allocate resources and automatically debug and relocate services, thereby, allowing the huge volume of requests on Baidu search platform to function stably across multiple internet data centers and a large network of servers.
Intellectual Property
The company has over 20,000 issued patents in mainland China covering invention, utility model and design, and intend to apply for more patents to protect its core technologies and intellectual property. The company’s name Baidu in Chinese, has been recognized as a well-known trademark in China by the Trademark Office of National Intellectual Property Administration. In addition to owning LOGO and the related logos, the company has applied for registration of various other trademarks. The company also has registered certain trademarks in the United States, Australia, Brazil, Canada, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Russia, Singapore, South Africa, South Korea, Thailand, the European Union and several other jurisdictions. In addition, the company has registered its domain name baidu.com and certain other domain names with authorized registrars of ICANN (Internet Corporation for Assigned Names and Numbers). The company has also successfully become designated Registry Operator for .baidu top-level domain names by ICANN.
Research and Development Expenses
The company’s research and development expenses included RMB24.2 billion (US$3.4 billion) in 2023.
Sales and Distribution
The company offers products and services for Baidu Mobile Ecosystem through its network of third-party agents and its direct sales team. The company typically enters into framework sales agreements with third-party agents, where third-party agents will sell online marketing services to customers, such as SMEs, domestic businesses and multinational companies on its behalf. The sales agreements typically limit the industry focus of the third-party agents. The third-party agents provide the company’s online marketing customers with numerous services, including identifying customers, collecting payments, assisting customers in setting up accounts with it, suggesting keywords to maximize return on investment and engaging in other marketing and educational services aimed at acquiring customers. The company has direct sales presence in Beijing, Shanghai, Guangzhou, Shenzhen, and other cities, covering the major regional markets for its online marketing services and other services. The company covers its key accounts through direct sales team and enter into agreements with such key accounts directly.
For AI Cloud, the company sells its cloud solutions, including IaaS, PaaS and SaaS to its enterprise clients directly or through solution integrators. The company offers smart transportation solutions directly to provide tailored solutions to meet the specific needs of its clients.
For Intelligent Driving & Other Growth Initiatives, the company sells its products and services to its clients directly and through its third-party agents.
iQIYI’s brand advertising is sold through third-party advertising agencies, including members of American Association of Advertising Agencies, or 4As, and leading Chinese advertising agencies, as well as through a direct sales force. Feed advertising services is sold primarily through third-party advertising agencies, whose existing long-term relationships and network resources the company strategically leverages, to increase its sales and expand its advertiser base.
Marketing
The company focuses on continually improving the quality of its products and services, as it satisfied users and customers are more likely to recommend its products and services to others. Through these efforts and the increased use of internet in China, the company has built its brand with modest marketing expenditures.
The company has implemented a number of marketing initiatives designed to promote its brand awareness among potential users, customers and Baidu Union partners. In addition to its brand positioning in the market, the company initiated a series of marketing activities to promote its products and technologies among existing and potential users and customers, including but not limited to, Baidu World Conference.
Competition
The company competes with Huawei and Kingsoft cloud for its cloud offerings. iQIYI competes with Tencent Video, Youku, Mango TV and Bilibili for both users and advertising customers.
History
The company was founded in 2000. It was incorporated in the Cayman Islands in 2000. The company was formerly known as Baidu.com, Inc. and changed its name to Baidu, Inc. in 2008.
