Author / Tian Xiaomeng

Baidu recently handed over a good financial report.

On March 1, baidu released the fourth quarter and full year performance report of 2021. According to the financial report, Baidu’s total revenue in the fourth quarter was 33.1 billion yuan ($5.19 billion), a year-on-year increase of 9%, higher than the market average expected 32.2 billion yuan; Not in accordance with non GAAP, the net profit was 4.08 billion yuan, a year-on-year decrease of 41%, higher than the average market expectation of 2.9 billion yuan.

The same is true for the annual financial report data of 2021. Baidu’s total annual revenue was 124.5 billion yuan ($19.54 billion), a year-on-year increase of 16%; Not in accordance with non GAAP, the net profit was 18.83 billion yuan, a year-on-year decrease of 14%.

Baidu’s revenue growth has received good feedback in the capital market. As of the closing of US stocks on March 1, baidu closed at US $162.86, up 6.84%; As of the closing on March 1, baidu Hong Kong shares rose 0.47% to HK $148.1.

Robin Li, chairman and chief executive of Baidu, said: “in 2021, we achieved solid results. In 2021, the core revenue of Baidu grew by 21% over the same period last year, because the new business revenue grew by 71%, accounting for 22% of Baidu’s core revenue, up from 16% in 2020.”

In the financial report, baidu classifies online marketing and new businesses including smart cloud and automatic driving as Baidu’s core, which is calculated differently from iqiyi’s revenue. In 2021, Baidu’s total core revenue reached 95.2 billion yuan, a year-on-year increase of 21%. In addition to new business income, the remaining 78% of Baidu’s core income is derived from online marketing. In 2021, Baidu’s online marketing revenue reached 74 billion yuan, a year-on-year increase of 12%.

At the same time, Baidu has also paid a lot of costs to promote the growth of its core business. According to the data, Baidu’s sales cost in 2021 was 64.3 billion yuan, a year-on-year increase of 17%, mainly due to the increase of content cost, traffic acquisition cost, bandwidth cost, commodity sales cost and other costs related to new artificial intelligence business. The R & D cost was 24.9 billion yuan, a year-on-year increase of 28%.

Online marketing accounts for the majority of Baidu’s revenue, but its revenue growth is slowing down; New business has carried the banner of revenue growth, but due to the high capital investment, it has also become an important factor in the decline of profits.

Advertising revenue growth slowed

In 2021, Baidu’s performance in online marketing is very stable.

Advertising is a low-cost and high return business of Internet companies. The signboard of “China’s first search engine” has always been the pride of Baidu. However, with the rise of mobile Internet platform, Tencent, Alibaba, byte beat and other enterprises are also standing in the center of the stage. Even though Baidu’s online marketing business still maintains growth, it shows a trend of slowing down. From the perspective of each quarter, Baidu’s online revenue of Q1, Q2 and Q3 in 2021 increased by 27%, 18% and 6% year-on-year respectively, and Q4 increased by only 1%.

For example, baidu app is currently Baidu’s largest traffic portal. In December 2021, Mau (monthly active users) reached 622 million, with a year-on-year increase of 14%, and daily login users accounted for 82%. Baidu tiktok is more than twice the WeChat MAU 1 billion 260 million from the user scale, compared with the MAU with a MAU of more than 600 million, Baidu App’s user activity is inferior by comparison with the user time.

In the face of the declining proportion of mobile Internet traffic, Lu Qi, President and chief operating officer of Baidu group, positioned Baidu as “not only a search engine company, but also an AI based platform company” in early 2017, combed the business into “four quadrants” and put forward the strategy of “all in AI”.

In the “four quadrants”, not only Baidu Post Bar, knowledge, map, glutinous rice and other four major businesses of Baidu in the past are divided into non main channels; Baidu finance, duos, smart driving, smart home, smart cloud, short video and AIG under exploration and incubation will also be put on the main channel, while mobile search, feed, Shoubai and PC search will be classified as mobile ecological track to provide cash flow support for the above businesses.

Although Lu Qi is no longer in Baidu, the transformation he guided has profoundly changed Baidu. He uses the profits of old businesses to cultivate new businesses. Finally, the plan of “reborn” also looks quite operational. However, the breeding of new business is bound to bring pain, and even the long-term investment may be wasted due to “dystocia”.

When will the new business be profitable

In the fourth quarter of 2021, Baidu’s new business revenue was 6.9 billion yuan, a year-on-year increase of 63%.

Luo Rong, Baidu’s chief financial officer, said in the earnings call that the smart cloud business has a significant pulling effect on Baidu’s non advertising revenue growth. Baidu Intelligent Cloud revenue in the fourth quarter was 5 billion 200 million yuan, an increase of 60% over the same period last year. The total revenue in 2021 was 15 billion 100 million yuan, up 64% over the same period last year.

Among the four major domestic public cloud enterprises, baidu cloud started late, but its growth rate is higher than the industry average. IDC released the 2021H1 China AI Cloud Service Market Research Report, in the AI public cloud service market, Baidu Intelligent Cloud ranked first in five consecutive times. By the end of 2021, the propeller developer community has gathered 4.06 million developers and served 157000 enterprises. Developers have created 476000 models on the propeller.

In addition, he said: “the total income of Baidu Intelligent Cloud in manufacturing, energy, transportation and public services has doubled in 2021.”

In contrast, Baidu’s automatic driving progress is slower. Although Apollo, Jidu and radish express have made phased progress, it still needs a few years to make a transition. In the financial report, although Baidu did not put forward the specific financial situation of new businesses separately, it can be seen that the revenue of new businesses other than smart cloud was 6.1 billion yuan in 2021 and 1.7 billion yuan in the fourth quarter of 2021. In August 2021, baidu launched a new and upgraded self driving travel service platform - “turnip express”. Up to now, “turnip express” has covered eight cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Changsha, Cangzhou and Yangquan. Among them, Beijing, Chongqing