Baidu (NASDAQ:BIDU), which expected its results to fully recover in 2017 last year, released its first quarter unaudited financial report on April 28.
Baidu's revenue for the quarter was RMB 16.9 billion (approximately US$2.45 billion), an increase of 6.8% over the same period last year; net profit in the first quarter was RMB 1.777 billion (approximately US$258.1 million), a year-on-year decline of 10.6%.
"In 2017, Baidu's strategic evolution from 'mobile first' to 'AI first' continues to promote strongly," said Robin Li, chairman and CEO of Baidu, after the financial report was released.
There are two main reasons for the decline in net profit: First, the content costs from iQiyi have increased significantly, which is not unrelated to the dispute over the top content in the video industry. On the other hand, it comes from Baidu's continuous investment in AI. According to the Q1 financial report, Baidu's R&D expenses were 2.835 billion yuan (US$411.8 million), a year-on-year increase of 34.9%.
In addition, Baidu also released two important information in its financial report: Baidu completed a stock repurchase worth US$200 million this quarter; former CFO Li Xinshi will be transferred to Baidu Capital CEO.
In an internal email from Li Yanhong exclusively obtained by a reporter from the First Financial Daily, he said that the stock repurchase is based on the company's full confidence in the prospects of the artificial intelligence industry and its own development, and Li Xinshi's transformation will promote the rapid combination of Baidu's artificial intelligence technology and traditional industry applications.
R&D expenditure in the first quarter was 2.8 billion
Baidu's financial report shows that the revenue of online marketing in the first quarter was RMB 14.738 billion (approximately US$2.141 billion), a year-on-year decline of 1.3%. In the first fiscal quarter of 2016, the number of active online marketing customers of Baidu was about 451,000, a year-on-year decrease of 23.2%. Baidu's average revenue from each online marketing customer in the first quarter was approximately RMB 32,200 (approximately US$4,678), a year-on-year increase of 26.8%.
The content cost of Baidu's revenue costs in the first quarter was RMB 2.636 billion (approximately US$382.9 million), accounting for 15.6% of total revenue, compared with 8.7% in the same period last year. The increase in Baidu's content costs is mainly due to the increase in iQiyi's content costs.
In addition, Baidu's R&D expenditure in the first quarter was RMB 2.835 billion (approximately US$411.8 million), a year-on-year increase of 34.9%, mainly due to the increase in R&D personnel-related costs.
It is worth noting that Baidu has not disclosed in its latest financial report that mobile search monthly users, Baidu Mobile Map monthly users, Baidu Wallet’s newly activated users, and the total transaction amount (GMV). However, there are still several sets of data in the financial report that are worth paying attention to:
First, in terms of Baidu's core business, traditional search advertisements and information flow, Baidu's information flow products that compete with Toutiao and other products have reached 83 million daily active users. At the same time, the number of content creators on the Baijiahao platform exceeds 450,000, double the previous season; currently more than 25% of the search results are video content. but,
Second, in terms of native advertising, Baidu's number of consumers in native advertising has increased by 30%, and nearly 1,000 large customers have already been deployed in Baidu's information flow advertising, and the revenue of native advertising doubled.
Third, in the O2O business, Baidu said that Nuomi Film business officially achieved profitability this quarter.
In terms of illegal advertisements such as medical and gambling that are concerned by the industry, Baidu data shows that as of April 2017, Baidu has restricted 220,000 medical violations, and more than 26,000 gambling violations; a total of 41,800 illegal customers have been cleared.
How is artificial intelligence implemented?
"Baidu focuses on core businesses and new businesses driven by AI, including cloud, financial services, DuerOS, and autonomous driving, all of which have huge long-term potential. Next quarter, we will continue to work to improve existing products and user experience through AI, and accelerate the development of new AI businesses." Lu Qi, vice chairman, group president and COO of Baidu, said after the financial report was released.
It can be seen that after Lu Qi took office in January 2017, he quickly burned several fires, abolished the medical business department and game business, and integrated the artificial intelligence team. Under his leadership, Baidu has deeply integrated NLP (natural language processing), KG (knowledge graph), and IDL (shen in 2017, Baidu accelerated its research and development, layout and investment in the field of artificial intelligence. It is also under his leadership that Baidu has acquired Raven Technology Company and Silicon Valley technology company xPerception.
In the field of artificial intelligence applications, Baidu established the Duer Division in the first quarter. DuerOS, as the next generation of dialogue AI platform, reached cooperation with giants such as Xiaoyu Zaijia, Haier, Midea, and Lenovo. Baidu also officially released the DuerOS smart chip.
In addition, Baidu's commercialization process of autonomous driving has accelerated, and an intelligent driving business group (IDG) is established, consisting of the autonomous driving business unit (L4), the intelligent automobile business unit (L3) and the Internet of Vehicles business. Baidu also released the "Apollo" plan to provide an open software platform to partners in the automotive industry and autonomous driving field to help them quickly build their own autonomous driving system. Baidu said it has cooperated with more than 60 car companies and more than 200 models around the world.
In terms of financial business, Baidu Finance’s application based on artificial intelligence has increased by 90% year-on-year. Artificial intelligence and big data use continuous upgrades to proprietary modeling to match users with products intelligently, thereby preventing financial fraud and appropriately assessing credit risks.
Baidu Cloud's ABC (artificial intelligence, big data, cloud computing) differentiation strategy has been recognized by the industry and has gained a large number of government-enterprise customer cooperation projects, including China Meteorological Administration, Xinhua News Agency, Minsheng Bank, etc. Baidu's cloud business is rapidly consolidating and enhancing its industry position, with solutions for big data marketing cloud and media cloud growing rapidly.
It is worth mentioning that Baidu cooperated with the family search platform "Baby Go Home" in the first quarter. The first batch of more than 20,000 family search data was connected to Baidu's cross-age facial recognition system. Fu Gui, 33, reunited with his relatives after being abducted for 27 years, becoming the first example of using artificial intelligence technology to help retrieve separated children.
As of March 31, 2017, the total value of cash, cash equivalents and short-term investments held by Baidu was RMB 90.678 billion (approximately US$13.174 billion).
In the financial report, Baidu made an outlook for the next quarter's performance: it is expected that in the second quarter of 2017, Baidu's total revenue will range from RMB 20.47 billion (about US$2.974 billion) to RMB 20.98 billion (about US$3.048 billion), a year-on-year increase of 12.1% to 14.9%.
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