On May 26, baidu released the unaudited financial report for the first quarter of 2022, with a revenue of 28.411 billion yuan, an increase of 1% over the same period of the previous year; The net profit under non US GAAP was RMB 3.879 billion, a year-on-year decrease of 10%. The decline in Baidu's net profit was mainly due to the decrease in online marketing revenue (advertising revenue) and the increase in R & D costs. According to the financial report, Baidu's online marketing revenue in the first quarter was 15.7 billion yuan, a year-on-year decrease of 4%. The core R & D expense was RMB 5.134 billion, accounting for more than 20% of Baidu's core revenue for six consecutive quarters.
"We must be fully aware of the difficulties of the current situation." After the release of the financial report, Robin Lee, the founder, chairman and CEO of Baidu, said in the company's internal letter that at the micro level, Baidu's first growth curve is under pressure, and the proportion of the second and third growth curves in the overall revenue structure needs to be improved.
Robin Lee mentioned that the second and third growth curves, namely Baidu AI Cloud and intelligent driving business, achieved a year-on-year growth of 35% in the first quarter of this year, realizing a non online marketing revenue of 5.7 billion yuan, accounting for 26.54% of the core revenue (excluding iqiyi revenue). This figure has increased compared with last year. However, due to the long-term pressure that the advertising business may face in the future, baidu still needs to continue to adjust its business structure to ensure the sustainable growth of core revenue.
Advertising decline and AI commercialization acceleration
This quarter, the advertising business is still the main revenue source of Baidu. Although it has declined, it is in line with market expectations.
On the one hand, the sluggish macro-economy and the upgrading of supervision have led traditional advertisers such as games, education and real estate to significantly reduce their budgets. A consensus has been reached in the industry on the weakness of the Internet advertising industry.
On the other hand, in recent years, the layout of search bidding advertising by giants such as Tencent and byte bounce has put Baidu under heavy pressure. Especially when the traffic entrance is less than the first two, Baidu's advertising business has declined since 2019.
However, with the inclination of core business, baidu seems unwilling to tangle too much in advertising business. At the performance exchange meeting after the release of the financial report, Luo Rong, chief financial officer of Baidu, said, "we focus on the future and make full efforts in Intelligent Cloud, mobile ecology, intelligent driving and intelligent transportation. It is very important for future growth."
According to the financial report, the revenue of Baidu AI Cloud business in the first quarter reached 3.9 billion yuan, a year-on-year increase of 45%, contributing 70% to the revenue of non advertising business.
Compared with the well-known personal cloud business, Baidu has made a key breakthrough in this year's Enterprise Cloud business. "This year, we have cooperated with many enterprises and public sector units, including energy, public utilities, transportation, etc., and we believe that there is still more development potential to be tapped in the future." Robin Lee believes that intelligent cloud business will be an important engine for Baidu to achieve long-term sustainable development.
Baidu said that as of May 20, 2022, the cumulative number of paddepaddle developers had increased to 4.77 million, serving 180000 enterprises and manufacturing 560000 models.
At the same time, intelligent cloud services also show strong adaptability in public transport. According to the financial report, by the end of the first quarter of 2022, 41 cities had implemented Baidu ace Intelligent Transportation Based on the contract amount of more than 10million yuan, a significant increase over the 16 cities last year.
However, at present, Baidu's Intelligent Cloud business is still at a loss. In the face of leading enterprises in the industry such as Alibaba cloud and Huawei cloud, Baidu's relatively weak IAAs and ecosystem construction still make the company's Intelligent Cloud business weak.
In this regard, Robin Lee said that the combination of cloud and AI has formed a unique competitive advantage for Baidu. "The AI cloud will gradually improve its financial data in the future, and the AI cloud will eventually achieve a very large growth potential."
In contrast, although the revenue growth of the intelligent driving business is less than that of the Intelligent Cloud business, the performance of the former in this quarter has proved that the intelligent driving business is enough to assume the role of Baidu's third growth curve.
According to the financial report, in the first quarter of 2022, the orders of unmanned vehicles supplied by "turnip express" reached 196000 person times, covering 10 cities including Beijing, Shanghai, Guangzhou and Shenzhen, and firmly ranking as the world's largest self driving travel service provider.
At the same time, the adjustment of domestic policies this year has also provided convenience for Baidu. In April this year, Beijing took the lead in allowing unmanned manned service on open roads within 60 square kilometers of Yizhuang high-level autonomous driving demonstration zone. Baidu was the first to obtain the license, realizing the travel service of "no one behind the steering wheel".
Although at this stage, due to policy restrictions, the self driving manned service is still unable to leave the company of safety officers, Robin Lee pointed out at the performance exchange meeting, "in the next decade, we will establish a solid business foundation. Eventually, there will be no safety officers in radish fast running vehicles in all cities. Of course, this also requires more necessary permits in different cities."
From these information in the financial report, it is not difficult to see that compared with other automatic driving manufacturers in the industry, Baidu, which has the first mover advantage, has basically completed the research and development test stage and started to roll out to the commercial operation stage. But that's still the question. Where is the breakeven point for the commercialization of driverless vehicles in the future?
The pain and crisis of transformation
From the results of the financial report, Baidu's submission of such an answer sheet in the first quarter of such a sluggish Internet industry has completely exceeded the industry's expectations for the company. In particular, it is not easy for its innovative business to maintain a 35% growth rate under the background of macroeconomic slowdown.
There is no doubt that such a result is inseparable from Baidu's adjustment of its business structure, but looking back on its recent actions, the company has indeed experienced several pains during the transformation.
At the beginning of this year, the game department subordinate to Baidu MEG (mobile ecological business group) was abolished as a whole, and the live broadcasting, real estate and other business departments were also significantly downsized. In fact, most of these departments belong to Baidu's marginal business scope. Baidu's move may be more to concentrate resources on developing innovative business.
However, the divestiture of the whole business line also means that Baidu completely bid farewell to its niche in the corresponding industry, which may miss many potential opportunities in the industry.
For example, in April this year, the General Administration of press and publication announced that the distribution of game titles that had been suspended for half a year was resumed. Among the first batch of 45 game titles to be resumed, including the "attacking rabbit" issued by Baidu game. The problem is that Baidu game Department has completed the overall abolition of the Department before this.
For a while, Baidu's misfortune became a joke: "the version number has been established, but the Department has not."
But this does not seem to change Baidu's determination to optimize its business structure. On May 5 this year, Robin Lee announced in an internal e-mail that a new round of senior management cadre rotation would be launched. One of the most concerned transfers was the transfer of Shen Shuan, the former head of MEG, to the head of ACG (Intelligent Cloud business group).
As a key figure who has helped Baidu complete the "elephant turn" in recent years, Shen Shuo has started to reform Baidu MEG for several times. The well-known "search + information flow" dual engine mobile ecology and "mobile ecology x+y strategy" in the industry were established under the promotion of Shen Shuo. These strategic driven changes have enabled Baidu MEG to dig out a new cash flow model in addition to the search advertising business.
And Shen Shuan's job transfer is enough to show Baidu's determination to expand its smart cloud business. The executive who has been in charge of MEG for many years can obviously bring more resources to ACG after taking office. In addition, combined with Shen Shuan's experience, it is not difficult to see that Baidu will focus on improving the liquidity of Intelligent Cloud business in the next stage, making it the real second growth curve.
Compared with the short-term pain caused by the optimization of business structure, baidu may need to be more alert to the potential crisis brought about by the intelligent driving business.
Although Baidu did not disclose the revenue data of autonomous driving in the first quarterly report, Robin Lee disclosed at the performance exchange meeting that, according to internal estimates, up to now, baidu ASD (Apollo autonomous driving platform) and small on-board OS of on-board information and entertainment system have achieved a total sales of more than 10billion yuan in fixed-point and contracted projects, compared with 8billion yuan in the previous quarter.
At the same time, Robin Lee also said frankly, "this growth is mainly driven by the sales pipeline of large automobile manufacturers."
In addition to the automatic driving products provided for the OEMs, I am afraid that other businesses of Baidu IDG (intelligent driving business group) are difficult to realize. For example, turnip express, its self driving travel service platform, is undoubtedly the most successful case in the industry from the perspective of the commercial implementation of self driving. However, compared with billions of R & D funds, the profit balance point of turnip express seems to be far away.
The commercial landing of autonomous driving is not a new concept, but no company has been able to explore a profit model, because low cost and large-scale are two difficult problems that this technology is difficult to avoid.
Similarly, Baidu can not solve the above problems in a short time. The first is cost control. Here, only the single vehicle cost is used to calculate. The price of the fifth generation Apollo moon that went offline last year was about 480000 yuan. According to yole's calculation, to meet the road conditions of robertaxi, the price of its bare car and the cost of its application kit amounted to about 200000 dollars. Its operating cost has far exceeded the current price of conventional online car Hailing. It should be noted that this does not include massive R & D expenses and platform operation costs.
Secondly, the issue of scale. At present, Baidu has obtained Zhilian automobile test licenses from 10 cities in China, but its operation scope is limited to limited areas. Most local governments are still in a wait-and-see state. Whether it can achieve scale depends entirely on the opening of the road traffic safety law at the national level in the future.
In this process, the commercialization of intelligent driving is a controversial application. Any sudden variable may delay the release of regulatory policies, so it is impossible for Baidu to make profits in this business.
Despite the constant risks, will Baidu reduce its investment in innovative business? I'm afraid not. In his internal email, Robin Lee clearly pointed out that in the future, Baidu will continue to practice the "pressure and marathon" R & D investment. At the same time, he said frankly, "this is not an easy way."
It seems that Robin Lee's gamble has just fallen.