After the Hong Kong stock market closed on November 21st, Baidu (9888. HK) released its third quarter performance report. According to the financial report, Baidu's total revenue in the third quarter of this year reached 33.56 billion yuan, a year-on-year decline of 3%, recording the largest decline in more than two years. The attributable net profit was 7.63 billion yuan, a year-on-year increase of 14%; However, under non GAAP accounting standards, net profit decreased by 19% year-on-year to 5.89 billion yuan.
Due to the impact of declining performance, Baidu's Hong Kong stock price fell by 9.06% as of noon on November 22.
In fact, besides the overall decline in revenue, Baidu's current problems are not limited to this. Recently, Baidu held a third quarter director level review meeting after completing a new round of organizational restructuring. Robin Lee, the founder of Baidu, delivered a ten thousand word speech at the conference to deeply analyze Baidu's future strategy and structural adjustment intention. However, Robin Lee did not seem to give a strong solution to the problems such as the decline of core business and the turmoil of senior personnel. Baidu is in multiple difficulties.
Core business under pressure, rare decline in revenue
According to Baidu's latest third quarter financial report data, if it weren't for Baidu's intelligent cloud business, Baidu's third quarter report might have been "thunderous".
According to the financial report, in the third quarter of 2024, Baidu achieved a revenue of 33.6 billion yuan, a year-on-year decrease of 3%. In fact, Baidu's revenue has been declining for two consecutive quarters. In the second quarter of this year, Baidu's revenue reached 33.93 billion yuan, a decrease of 0.4% compared to the same period last year.
Starting from the second quarter of 2023, Baidu's revenue growth rate has not exceeded double digits, marking the first time in nearly two years that Baidu's total revenue has shown a downward trend. Robin Lee once explained in his speech that the current advertising business is under various external pressures, including the uncertainty of the macroeconomic environment and the intensification of industry competition. Meanwhile, the search business has also faced significant challenges internally due to the innovation of artificial intelligence technology.
In terms of revenue composition, in the third quarter of this year, Baidu's core business revenue reached 26.5 billion yuan, which was basically the same as the same period last year, and the main business revenue, which accounted for a large proportion, did not increase. At the same time, Baidu's online marketing revenue and intelligent cloud business revenue are also showing completely different trends. Online marketing revenue decreased by 4% to 18.8 billion yuan; The intelligent cloud business achieved a significant growth of 12%, reaching 7.7 billion yuan, which to some extent compensated for the decline in online marketing revenue.
On the other hand, Baidu's Apollo Go, which has high hopes in the field of intelligent driving services, has also slowed down its order growth significantly. In the third quarter, Apollo Go provided 9.88 million orders for automatic driving, with a year-on-year growth of only 20%. This is mainly because the business scope of Apollo Go is limited to specific areas in a few cities, thus limiting the growth of orders.
In addition, the performance of iQiyi business under Baidu is not satisfactory. In the third quarter, iQiyi's revenue dropped by 10% year-on-year to 7.2 billion yuan, which undoubtedly lowered Baidu's overall revenue level. From a profit perspective, Baidu's operating profit for the third quarter was 5.9 billion yuan, a decrease of 400 million yuan compared to the same period last year. This shrinkage is mainly due to the decline in iQiyi's operating profits. IQiyi's operating profit decreased by 68% in the third quarter, to only 240 million yuan.
High level personnel earthquake, two senior vice presidents resign
As early as October 18th this year, Baidu internally released an email announcing the job changes of three SVP (Senior Vice President) and above level executives. Among them, Luo Rong, the Executive Vice President and former CFO of the group, has been transferred to the Mobile Ecology Business Group (MEG) as the head and will no longer concurrently serve as the CFO of the group. At the same time, the Health Business Group (HCG) has been merged into MEG, and HCG's former president and senior vice president, He Mingke, will no longer be responsible for the specific work of the group. In addition, He Junjie, the senior vice president of the group and former head of MEG, has also undergone job rotation and will serve as the acting CFO.
It is worth noting that the three executives, Luo Rong, He Junjie, and He Mingke, are all "new faces" who have only joined Baidu in the past two years and are not senior veterans within Baidu. This personnel change not only involves three people, but also reflects Baidu's new trend in management adjustment.
According to reports, Baidu's core business group has undergone another management adjustment recently, with two senior vice presidents, Xiao Yang and Wang Fengyang, quietly resigning. Xiao Yang serves as Vice President and MEG CTO of Baidu Group, while Wang Fengyang serves as Vice President and Head of Mobile Ecological Business System of Baidu Group. MEG, as one of Baidu's core business groups, is responsible for the research and operation of multiple important products and platforms, including Baidu Search, Baidu App, etc. This personnel change has had a significant impact on the development of MEG and even the entire Baidu.
Deeply cultivating AI? The profit model of intelligent agent ecosystem remains to be solved
At the 2024 Baidu World Conference hosted by Baidu in Shanghai, Robin Lee compared agents to websites in the PC era and upgraded We Media in the mobile Internet era, emphasizing that they are more intelligent and anthropomorphic, capable of playing a variety of roles such as sales, customer service and assistant. However, compared to previous editions, this year's Baidu World Conference appears to be relatively lackluster in terms of innovation highlights. Looking back at the past, whether it was the stunning debut of the metaverse platform "Xiliang" in 2022 or the successful landing of autonomous taxi services in 2021, both have attracted widespread attention and discussion.
There are also many questions in the industry about the profit model of the intelligent agent ecosystem. Looking back at the PC era and the self media era, both websites and self media have achieved profitability through different means. However, in the era of intelligent agents, how should its profit model be constructed? At present, only a few AI companies in the market have achieved profitability through intelligent agents, but their customer base is weak and difficult to support long-term development.
The launch of Baidu's "Miaoda" product aims to lower the development threshold and provide convenient tools for developers. However, the operational complexity of this product is relatively high for ordinary users, making it more suitable for developers to use within the enterprise and difficult to reach a wider user base.
Perhaps we can only hope to promote the popularization of intelligent agents by serving the developer community well. But where is the real breakthrough point of intelligent agents? Is it a surge in traffic or a leap in revenue? Baidu did not provide a clear answer. Currently, Baidu is increasingly using AI to generate content in search results, which to some extent squeezes the development space of industry websites, webmasters, and content creators, leading to a decrease in external traffic and forming a vicious cycle that is not conducive to ecological development.
Baidu hopes to replicate the glory of the website era 20 years ago and build a complete intelligent agent ecosystem. However, the reality is that current mainstream business practices such as Alibaba, Huawei, Tencent, etc. rely more on sales, public relations, and investment methods. Baidu attempts to establish an ecosystem for enterprises and governments (TO B and TO G) by relying on the developer community, but the high salaries, high base salaries, and relatively limited influence of developers pose significant challenges to this plan.
Therefore, Baidu may need to find more effective ways to promote the popularization and commercialization of intelligent agents. The future development may only be determined by time. (Produced by Financial Weekly - Caishi Hui)