Baidu, how to get out of the “value depression”?

On August 14, Beijing time, baidu released the company’s unaudited financial report data for the second quarter of 2020, and disclosed the latest progress of Baidu mobile terminal, AI and other strategic businesses. As of yesterday’s U.S. stock close, Baidu’s latest market value was $42.9 billion. Analysts pointed out that this market value can not reflect the real value of Baidu, Baidu has become a “value depression.”. According to the Q2 financial report of Baidu 2020, baidu achieved revenue of 26.03 billion yuan, an increase of 15% compared with the previous quarter, non GAAP of 5.6 billion yuan, a year-on-year increase of 187%, and non GAAP of 5.08 billion yuan, a year-on-year increase of 40%. Among them, “Baidu core” achieved revenue of 18.93 billion yuan, an increase of 24% compared with the previous quarter. < / P > < p > for Baidu, the growth of profit comes from the increase of revenue and the decrease of cost. According to the financial report data, Baidu’s revenue cost in the second quarter of 2020 is 13.1 billion yuan, down 19% from the same period last year; the sales, general and administrative expenses are 4.4 billion yuan, 16% lower than the same period last year, but the R & D expenditure remains at a high level. < / P > < p > the higher revenue enables Baidu to obtain more stable cash flow and abundant cash reserves. According to the latest quarterly financial report, baidu currently has 154.1 billion yuan in cash, cash equivalents, restricted funds and short-term investment assets. In the domestic Internet companies, this number is in the forefront. < / P > < p > another noteworthy indicator of Baidu is its R & D investment. During the NPC and CPPCC sessions in 2019, Robin Li said in an interview with the media: “Baidu has invested about 15% of the total revenue in recent years, which should be the highest proportion of R & D in mainstream domestic companies.”

, however, Robin Li still seems modest about Baidu’s R & D investment figures. Baidu financial report data shows that since the fourth quarter of 2018, baidu R & D has always accounted for more than 16%. According to the latest Q2 financial report in 2020, Baidu’s R & D investment in that quarter was 4.8 billion yuan, accounting for 18.5% of the total revenue. In the mainstream Internet companies in China, this number is rare. < / P > < p > for Baidu, which is on the road of AI, such a high R & D investment is also an inevitable choice. In R & D, only willing to spend money, in order to exchange for high-level, large-scale development team. Facing the future, baidu still dares to bet. < p > < p > in a research report released in June this year by Australian Financial Analyst simple Wall St, Baidu’s share price has been undervalued. This report focuses on Baidu’s cash flow indicators, and calculates Baidu’s future cash flow. In this calculation, Baidu’s share price is 49% undervalued. At the same time, the capital market also has many conjectures about Baidu. In May this year, Robin Li publicly told the media that Baidu was discussing the two listing plan in Hong Kong. Recently, there is news again that Baidu may spin off Baidu’s online disk business and list on the domestic science and technology innovation board. Its valuation is expected to reach 30-40 billion yuan. < / P > < p > in 2016, baidu began to increase investment in AI, and even was once interpreted as “all in AI”. And Baidu’s latest quarterly financial information shows that after four years, baidu AI has begun mass commercialization. < / P > < p > data shows that Baidu AI open platform “Baidu brain” has opened more than 250 core AI capabilities to the outside world, and has served more than 1.9 million developers. At present, its daily average call amount has exceeded 1 trillion times, and the number of calls in the fields of voice, face, NLP and OCR has reached the first in China.

in the B terminal AI market, Baidu’s product solution is Baidu intelligent cloud. It combines traditional cloud services with AI technology, which can not only provide customers with traditional cloud computing services, but also directly output AI capabilities for customers.

in the traditional cloud computing market, the US market research firm Synergy Research released in June this year the first quarter of 2020 cloud and data center infrastructure services survey report, Baidu Intelligent Cloud in the domestic market share ranked third. In China, cctv.com has been widely used in the AI and Baidu, such as the State Grid, China Southern Power Grid, CCTV network, China Building Materials Group, etc., to realize AI’s wide application in the media and energy fields. < / P > < p > in a special period, baidu is also tapping the potential of AI. For example, in April this year, baidu announced that it was funding AI computing resources for the Institute of Biophysics, Chinese Academy of Sciences, to support the latter’s “drug screening for new coronavirus” project. < / P > < p > from the customer list of Baidu AI business, it is not difficult to see that AI is no longer the demand of a few cutting-edge technology companies, but has become an important infrastructure of nearly the whole industry. In the past, people often described cloud computing as “cloud service that can be obtained by boiling water faucets”, while Baidu intelligent cloud is trying to bring AI services that can be obtained by boiling water tap. AI has also become an important part of China’s new infrastructure.

today, Baidu intelligent cloud has become Baidu’s most potential business. In addition, Baidu has formed a complete ecosystem of Baidu brain, propeller, chip, data center and Apollo around AI. Recently, baidu Apollo’s self driving taxi has landed in Changsha and other cities. Apollo also joined hands with the Highway Science Research Institute of the Ministry of transport, Hebei transportation planning and Design Institute and Guangzhou Development Zone to jointly explore the new infrastructure of AI road transportation.

and in the background of AI becoming China’s new infrastructure, Baidu also put forward a new long-term goal. It is estimated that by 2030, the number of Baidu Intelligent Cloud servers will exceed 5 million units. In the next 5 years, Baidu expects to train AI talents 5 million. < / P > < p > however, in the C-end, the volume of small speakers is still strong. According to the strategy analytics market report, Amazon, Google and Baidu will still occupy the top three positions in the global sales of Q2 smart speakers in 2020. In the second quarter, due to the impact of the epidemic, people’s desire to buy consumer electronic products was generally reduced, and the global market shipment of smart speakers decreased by 0.4% year-on-year. In this context, small volume shipment increased by 8% against the trend, maintaining the advantage of the world’s largest growth rate since the first quarter. < / P > < p > it is worth noting that the breakthrough of small brand is not limited to the shipment volume. Baidu’s official data show that the average daily use of small devices has also been significantly improved. Take smart screen devices as an example. In March this year, the average daily use time of small smart screen users exceeded 3 hours, an increase of more than 20% compared with the previous quarter. In June, the average daily long video time was 158 minutes, the short video time was 69 minutes, and the learning time of children was more than 30 minutes. < / P > < p > it is not difficult to see that smart speakers and smart screens are becoming new hardware import products, while Baidu’s AI hardware has begun to bring a steady stream of traffic to iqiyi, good-looking videos and other products in Baidu’s ecology. < / P > < p > according to the latest quarterly financial report data of Baidu, the daily active users of Baidu app reached 204 million. On the basis of the number of active users per day, another big goal of Baidu is to increase the stay time of users. In order to achieve this goal, Baidu’s most powerful means is intelligent small program. According to the latest quarterly financial data, baidu smart app’s monthly active users have reached 339 million, a year-on-year increase of 25%. < / P > < p > in addition, baidu app has launched a “service center”, which integrates the functions of third-party local life services such as recharge and payment, medical and health care, express service, travel and travel. In the field of service, baidu Health launched the “ask doctor” service during the new epidemic, providing more than 100 million medical consultation services for domestic netizens and overseas Chinese. In the second quarter, baidu knowledge products organized more than 800 live broadcasts, and received more than 40 million viewers. < / P > < p > it is not difficult to see that products such as applets, service centers and Baidu live broadcast have realized the closed loop of user experience of Baidu mobile terminal, which has enabled Baidu app to gain more service capabilities and allow users to stay in Baidu’s ecosystem. < / P > < p > and the logic of the hosting page of another major commercial product of Baidu is similar to it. Hosting page similar to H5 page, built in Baidu station, can be exposed through Baidu search and other channels. Baidu small and medium-sized enterprises can not get more micro traffic. Today, revenue from Baidu hosting pages accounts for about% of Baidu’s core online. < / P > < p > in the Internet industry, search engine is a huge flow entrance. However, the design idea of search engine products in the past was “run out and go” to realize the connection between users and content, which also made it difficult for search engine products such as Baidu to establish a complete ecological closed loop. And the emergence of small programs and hosting pages and other products, let Baidu get the ability to create a mobile ecological closed-loop. < / P > < p > on the content side, baidu is also trying to mobilize all the resources of the platform to support creators. According to the second quarter financial report, there are about 3.4 million creators of 100 titles, an increase of 52% year-on-year. In the past, Baidu’s creator ecology was launched around the hundred brand. At the Baidu “Vientiane” mobile ecology conference in May this year, Shen Shuo, vice president of Baidu mobile ecological business group, said that Baidu will focus on getting through multiple Baidu products this year, “let the creator create once, and you can connect 1 billion Baidu users.” < p > < p > specifically, baidu announced that it would open up Baidu related products such as Baidu app, iqiyi, baijiahao, smart app, good-looking video, Baidu Encyclopedia, etc., so that creators can distribute their own content to these platforms and get more traffic. < / P > < p > from the user side to the content side, the closed-loop system of Baidu mobile ecology has been initially completed. And Robin Li also said that in the future Baidu App will be built as “super App”. On this basis, the business ability of Baidu app and the whole mobile terminal is expected to be further improved in the future. < / P > < p > with the gradual promotion of mobile end closed-loop system and AI commercialization landing, baidu is forming a new two wheel drive system. In the future, baidu still needs to tell investors this “new story” and walk out of the “value depression”.