Live broadcast, e-commerce, mergers and acquisitions, frequent movements of Baidu, Inc. can rekindle market confidence?

This year, Baidu, Inc. 's share price opened low and went high. From US$100 in May to US$195 which closed on December 29th, Baidu, Inc. 's share price almost doubled. Will this trend continue? Why did Baidu, Inc. jump from the trough of the middle of the year?

Since the beginning of this year, Baidu, Inc. has made a lot of moves. Business, has carried out live knowledge, live e-commerce, from the investment, Baidu, Inc. has acquired "Gaide ranking" and live broadcast platform YY, a series of business measures of Baidu, Inc. began to show power?

Will Baidu, Inc. 's confidence come back if he fights commercialization again?

Confidence in Baidu, Inc. has gradually declined in the past two years, as reflected in the share price. From an all-time high (US$284.07) in May 2018, Baidu, Inc. hit a recent all-time low of US $82 in the middle of this year.

In fact, from the disappearance of the status of "super search" to the rise of information flow advertising, Baidu, Inc. once dispelled market skepticism and re-established market confidence in 2016-2017, and directly led the company to create the highest market value in 2018.

However, the rise of native short video advertising in 2018 worsened Baidu, Inc. 's external competitive environment. The appeal of information flow advertising, which has become the new engine, has declined, slowing to 12% from 129% the previous year.

What worries the market even more is that apart from advertising, Baidu, Inc., who gives up local life, seems to lack a medium-term commercial cash path between AI and advertising.

Due to the urgent need for a cash machine between the first growth curve (advertising) and the third growth curve (AI), Baidu, Inc. has been trying to explore the path of cash flow in the past two years.

After getting access to Mini Program, short videos and even red packets, Baidu, Inc. finally focused on live streaming, an industry that created the myth of money printing in 16-17.

In March, Baidu, Inc. set up a live broadcast team and launched the live broadcast function. In April, he launched a series of self-made high-quality live programs. In May, he released the "Baidu, Inc. Live gathering Plan". In June, Gu Feng, founder of HUYA Inc., joined Baidu, Inc. as the person in charge of the live broadcast business. In October, Baidu, Inc. launched the pan-entertainment live broadcast product "Yinboo" and announced the acquisition of YY in November.

Once again try the water for commercialization, the market confidence in Baidu, Inc. also began to gradually pick up, in this quarter's financial results, Baidu, Inc. 's share price also rebounded.

Live broadcast, is it a step behind or is there something else?

Baidu, Inc. 's intention to turn live streaming into a second growth curve is obvious, but will the "live revival" plan succeed?

At present, Baidu, Inc. 's live broadcast development direction is mainly divided into three directions: knowledge live broadcast, entertainment live broadcast and live broadcast with goods.

According to the data released by Baidu, Inc., during the epidemic, the number of live broadcast viewing users increased by 430% compared with that before the epidemic, with the fastest growth in information and knowledge live broadcasts. Because of this, the live broadcast of knowledge has become the starting point for Baidu, Inc. to enter the live broadcast.

As a search portal, Baidu, Inc. itself means an all-inclusive question, and every search and the presentation of search results is actually a question and an answer. To this end, whether live knowledge streaming makes money or not, it will help to provide users with more diversified content and enhance user experience, thus contributing to Baidu, Inc. 's transformation to the "post-super search era".

However, knowledge live broadcast is temporarily unable to shoulder the important task of Baidu, Inc. 's second growth curve, mainly because the current realization mode of knowledge live broadcast is still unclear. For the same user, the demand for knowledge is not repetitive and continuous, which means that knowledge live streaming can only pry fewer and fewer people over a period of time (similar to education live broadcast), not more people every day than yesterday. Compared with entertainment live broadcast, the economies of scale of knowledge live broadcast is not significant.

For different users, the repeatability of knowledge demand is more suitable for precipitated video mode than live mode.

However, live broadcasting has strong interaction that video does not have, so finding knowledge content suitable for interaction and finding corresponding ways to cash in (reward or pay for knowledge) will be the next important task for Baidu, Inc. 's knowledge live broadcast.

Since the knowledge live broadcast has not yet found a mature way of realization, live entertainment has become the most important means to place Baidu, Inc. 's realization goal, so the acquisition of YY is of course not so difficult to understand.

In the third quarter of 2020, YY Live MAU reached 41.3 million, an increase of 3.4% over the same period last year; revenue was 2.89 billion yuan, operating profit was 780 million yuan, and operating profit margin was 26.9%. The total annual revenue can reach about 12 billion yuan, the operating profit is 2.5 billion yuan, and the net profit is 2.7 billion.

At a purchase price of $3.6 billion (about 23.5 billion yuan), Baidu, Inc. values YY at a price-to-earnings ratio of about 9 times and a price-to-sales ratio of about 2 times. Compared with the PE of Momo Inc and Yingke in the last 12 months, the valuation is relatively reasonable.

It is worth noting that YY's revenue is in a period of decline, and with the exception of Q3, operating margins remain around 20%. If you take into account the future trends of these two core variables, YY has taken more advantage of the deal in a sense-selling stagnant domestic businesses and fully focusing on overseas live streaming (BIGO LIVE) and short video (LIKEE).

For Baidu, Inc., after the acquisition, the cooperation between YY and Baidu, Inc. still needs to continue to run-in, how to establish a closer relationship between knowledge live broadcast and entertainment live broadcast, and how to optimize the allocation of resources is still an uphill battle for Baidu, Inc..

Although the road is tortuous, the acquisition of YY is not "superfluous" for Baidu, Inc.. First of all, at the peak of mobile Internet user traffic today, the duration of individual users has become a new battlefield. Entertainment content is a natural eye attraction. In the first half of 2020, the market share of short video use was close to 20%, making it the second largest Kill Time industry after instant messaging.

Baidu, Inc., as a search tool, although the number of users is larger, but the duration of user use is lower. According to QuestMobile, the number of monthly active users of Baidu, Inc. reached 550 million in October 2020, much higher than the 260 million of the headlines, but his average daily use time was only 60 per cent of that of the headlines (Baidu, Inc. 42.7minutes vs 69.9minutes).

YY's advantages in entertainment content will help Baidu, Inc. supplement the diversity of content and help Baidu, Inc. grab more users in the era of mobile traffic.

In addition, as Baidu, Inc. begins to lay out the goods on the live broadcast, the shortcomings of the anchor resources are highlighted, and the addition of YY can help Baidu, Inc. increase the weight in the new track of bringing goods to the live broadcast.

In terms of effectiveness, Baidu, Inc. 's repeated efforts, although the role of the revenue side has not yet been reflected, but the results in terms of users are more significant. According to QuestMobile monitoring data, the number of monthly active users of Baidu, Inc. APP has increased from 491 million in November last year to 546 million in October, an increase of about 54.7 million over the past year. By contrast, Jinri Toutiao's APP grew by only 6.17 million over the same period.

From this point of view, although Baidu, Inc. 's live broadcast road faces many tests, it is not just a futile effort that is one beat behind, and it is worth looking forward to whether the results of users can be turned into revenue results in the future.

AI, the long-term competitiveness is becoming prominent.

For Baidu, Inc., it is unclear whether live broadcasting can shoulder the responsibility of the second growth curve, but how competitive is AI as its most important long-term strategic value?

Baidu, Inc. 's integrated layout in artificial intelligence is mainly embodied in Baidu, Inc. 's brain. It includes basic layer, perceptual layer, cognitive layer, platform layer and security. The basic layer is data, computing power and algorithms, which is the core foundation to support the rapid development of artificial intelligence; the perceptual layer includes voice, vision, virtual reality and augmented reality technology; the cognitive layer includes language and knowledge technology, which enables machines to master knowledge, understand language, and have cognitive abilities such as reading, expression, thinking and reasoning, like human beings; and the security system runs through all layers of Baidu, Inc. 's brain, escorting AI technology and applications.

It can be said that Baidu, Inc. 's brain is the base of Baidu, Inc. 's artificial intelligence (which plays a major role in the basic and technical layers of artificial intelligence in a general sense), while in the front-end application layer, there are three most important application products: Apollo (autopilot open platform), Duer OS (conversational artificial intelligence system) and Baidu, Inc. intelligent cloud (industrial intelligence solution, cloud computing brand).

At present, DuerOS is the most common intelligent dialogue system for users, which can be used in robots, mobile phones, televisions and other terminal devices. at present, DuerOS intelligent solutions cover five major fields, such as large household appliances, small household appliances, home appliances, car devices and portable devices. Covering hotel, pension and real estate industry solutions.

The counterattack of small smart speakers may prove the competitiveness of DuerOS. According to Canalys, shipments of small smart speakers ranked first in China's smart speakers market in the first half of 2020, while Baidu, Inc. 's shipments lagged far behind XIAOMI and BABA in 2018.

More importantly, as a pry for smart devices, Baidu, Inc. 's achievements in smart speakers will help him open a bigger market on other devices.

As for Apollo, according to the official website, Baidu, Inc. has a total of 8 Apollo solutions (see Annex 5 for details). Zhi Krypton believes that maps, as the basis of intelligent driving solutions, are a powerful standard for testing the competitiveness of enterprises in self-driving. High-precision map is the key infrastructure to realize autopilot ability and is an effective supplement to autopilot sensor. According to the hierarchical definition of autopilot, high-precision map is a necessary capability of L3 + autopilot system.

Up to now, a total of 20 enterprises in China have obtained the first-class surveying and mapping qualification for high-precision maps, and Baidu, Inc. is one of them, and this is only the qualification barrier owned by Baidu, Inc.. More important than this barrier is the scale advantage that Baidu, Inc. has achieved on high-precision maps.

Compared with traditional navigation maps, the real-time performance of high-precision maps puts forward higher requirements for data processing ability, and the demand for data is also greatly increased. When using high-precision maps to carry out autopilot, users' real-time driving data will become an important data source of high-precision maps. In other words, the more user feedback data, the more accurate the map. This means that those who can grasp the advantage of market share earlier (larger user scale and more data sources) will be able to dominate the market. Data economies of scale will be fully reflected in the industry, and the strong will always be strong. And Baidu, Inc. has shown an advantage at present.

According to a report released by IDC, the top four head map merchants in China's high-precision map market in 2019 are Baidu, Inc., Siwei Tuxin, Gaode and Yitutong. Among them, Baidu, Inc. has the highest market share, reaching 29.3%, Siwei Tuxin 21.7%, Gaode and Yitutong 17.9% and 14.7% respectively.

Thus it can be seen that whether in DuerOS or in Apollo, Baidu, Inc. AI's competitiveness has begun to show its edge. In the short term, with smart speakers as the fulcrum, DuerOS is opening up a broader market space; in the long run, the cash pattern of high-precision maps is clear (pay with maps to hit the road), and the barriers are obvious.

Generally speaking, as the third growth curve of Baidu, Inc., the potential of AI should not be underestimated. However, as a step between link advertising and AI before dawn, it is very important for Baidu, Inc. whether LVB can play a greater role at present.

For this reason, we have reason to believe that Baidu, Inc. still has a chance to turn the card, but if you want to turn the market, you first need to wait, and secondly, you need Baidu, Inc. to take the next step. Accumulate small steps, even thousands of miles.

Annex I: history of Information flow Advertising

Annex II: industrial structure of artificial intelligence

Generally speaking, the industrial structure of artificial intelligence can be divided into basic layer, technical layer and application layer. The basic layer includes software and hardware facilities and data services (data, chips, CPU, sensors, etc.); the technical layer mainly refers to the basic framework, algorithm model (deep learning, knowledge graph, computer vision, natural language processing, intelligent speech recognition). The application layer mainly refers to some intelligent solutions and application scenarios (intelligent operating system, finance, health care, education and other industries as a whole can only solve solutions, consumer intelligent terminals).

Annex 3: artificial intelligence industry map

Annex IV: definition of level 5 autopilot

L0: alarm

English: the vehicle supports only one vertical or horizontal control at the same time, and all other controls are performed by the driver; the driver is responsible for environmental observation; the driver is responsible for operation after functional degradation; limited scenarios

L2: the vehicle can support at least one longitudinal or horizontal control at the same time, and all other controls are completed by the driver; the driver is responsible for environmental observation; the driver is responsible for operation after functional degradation; limited scenarios

L3: the vehicle itself is responsible for all control; the vehicle is responsible for environmental observation; the driver is responsible for operation after functional degradation (including environmental observation); limited scenarios

L4: the vehicle itself is responsible for all control; environmental observation is the responsibility of the vehicle; after functional degradation, the vehicle is still responsible for operation (including environmental observation); limited scenarios

L5 (SAE): the vehicle itself is responsible for all control; the vehicle is responsible for environmental observation; after the functional degradation, the vehicle is still responsible for operation (including environmental observation); the whole scene

Annex 5: eight solutions of Apollo

1. Robtaxi (self-driving taxi) solution

2. Valet Parking self-parking mass production solution.

3. The integrated solution of self-driving vehicle and road coordination.

4. Intelligent vehicle cloud solution for vehicle networking

5. Minibus self-driving minibus (Apolon) solution

6. Smart Traffic Signals intelligent signal control solution.

7. Networking solution of small vehicle OS vehicle

8. 5G cloud driving service solution

Annex VI:

Annex VII:

Since 2016, Baidu, Inc. 's focus has shifted to the areas of content ecology and intelligent search, and the strategic position of "Local Life" in Baidu, Inc. is declining. From 2017 to 2018, Baidu, Inc. takeout and Baidu, Inc. glutinous rice were successively acquired by ele.me and iQIYI, Inc., Baidu, Inc. in local life.