On November 21st, Baidu released its third quarter financial report, which showed a revenue of 34.447 billion yuan in the third quarter, a year-on-year increase of 6%; The net profit attributable to Baidu is 6.7 billion yuan; According to non US GAAP, the net profit attributable to Baidu was 7.3 billion yuan, a year-on-year increase of 23%.
This year's big model has received widespread attention, and Baidu's Wenxin big model has also attracted attention. Baidu has started using the Wenxin Big Model to restructure its internal business. At the financial report conference, Robin Lee, the founder, chairman and CEO of Baidu, said that Baidu was reconstructing its advertising system with Wenxin model, including generative creativity, generative orientation and other services. Advertisers using AI's new functions achieved an average high conversion rate in the third quarter.
Another noteworthy issue is the commercialization of large models. Baidu released version 4.0 of the Wenxin Big Model in the third quarter and plans to charge for use by businesses and consumers.
In addition, on the day of the financial report release, Baidu also announced that it had appointed Xu Ran, the new CEO of JD Group, as an independent director of Baidu, effective from January 1, 2024.
Reconstructing the Advertising System with the Wen Xin Big Model
According to the financial report, Baidu's revenue in the third quarter of 2023 reached 34.447 billion yuan, a 6% increase from 32.54 billion yuan in the same period last year.
Baidu's core revenue from Baidu in the third quarter of 2023 was 26.6 billion yuan, a year-on-year increase of 5%; Among them, Baidu's core online marketing revenue was 19.7 billion yuan, a year-on-year increase of 5%; The revenue from non online marketing was 6.9 billion yuan, a year-on-year increase of 6%. IQiyi's revenue in the third quarter of 2023 was 8 billion yuan, a year-on-year increase of 7%.
Since ERNIE Bot was released in March this year, Baidu has announced that it will use the big model to reconstruct Baidu's search, online disk, library, map and other businesses.
The convening of the 2023 Baidu World Congress has gradually clarified Baidu's AI strategy. The growth of user time, the improvement of advertising monetization efficiency, and the introduction of AI infrastructure and AI native applications will all bring additional AI commercialization gains, "said a research report released by Tianfeng Securities.
According to the financial report, Baidu App had 663 million monthly active users in September 2023, an increase of 5% year-on-year.
Robin Lee took Darnay Education, an IT professional education company, as an example, saying that after using the new functions, the company's conversion rate increased by 23.3%, and its ROI (return on investment) increased by 22.7%. "The restructured advertising system is expected to bring hundreds of millions of yuan of incremental revenue in the fourth quarter," Robin Lee said.
From a profit perspective, in the third quarter of 2023, the net profit attributable to Baidu was 6.7 billion yuan; According to non US GAAP, the net profit attributable to Baidu was 7.3 billion yuan, a year-on-year increase of 23%.
Baidu's CFO Luo Rong said, "Baidu's core has maintained a stable profit margin this quarter, and our continuous investment in artificial intelligence has laid the foundation for technology and product innovation. In the future, we will continue to prioritize investment in artificial intelligence, especially generative AI and basic models. Baidu will unwaveringly focus on efficiency and strategic resource allocation
Baidu's sales cost in the third quarter of 2023 was 16.3 billion yuan, which remained basically unchanged compared to the same period last year; The sales and management expenses were 5.8 billion yuan, an increase of 11% year-on-year, mainly due to an increase in channel expenses and market promotion expenses. The R&D expense was 6.1 billion yuan, up 6% year on year, mainly due to the increase of depreciation expense and server hosting expense for supporting ERNIE Bot research.
AI native applications enable paid usage mode
At present, based on the big model of ERNIE Bot and Wenxin Yiyan, Baidu has comprehensively restructured its products and launched many AI native applications such as Baidu New Search, Baidu New Library, Baidu Online Disk "Cloud One Flower", Baidu Maps, Baidu GBI, etc.
Baidu stated that the restructured AI native application has achieved significant growth in user volume: on the Baidu App, 640000 creators have used AI assisted creative tools to produce 14 million pieces of content, receiving 30 billion views; After the launch of Baidu's online drive "Yunyiduo", it has become the world's first "personal cloud intelligent assistant" with a user base of 20 million; Baidu Wenku's AI new features have accumulated over 30 million users. At the same time, the user stickiness and activity of Baidu AI native applications are also rapidly increasing. According to reports, ERNIE Bot has used 20 million prompt words online; The cumulative usage of new features in Baidu Wenku AI has exceeded 200 million; As of mid October, the cumulative number of requests for Baidu's input method "Super Write" has exceeded 100 million, and the user likes rate has exceeded 80%.
For more powerful AI native applications, users' willingness to pay is increasing. Baidu stated that taking Baidu Wenku as an example, the library has been restructured from a "content tool" to a "productivity tool", introducing functions such as intelligent text and PPT generation and editing, resulting in a significant increase in the library's payment rate.
In the past three months, ERNIE Bot, a dialogic big language model under Baidu, has been open to the whole society, and Baidu has also released version 4.0 of Wenxin's big model. At present, the number of ERNIE Bot users has reached 70 million, and the "ERNIE Bot Professional Edition" based on Wenxin Big Model 4.0 has been launched, which will be open for charging for professional needs. Compared with the free basic version, the professional version has stronger model capabilities and image generation capabilities.
On the financial report conference call, Robin Lee revealed that Wenxin's 4.0 version has a reputation for deep understanding and complex reasoning ability. Compared with version 3.5 and other large language models on the market, version 4.0 can generate more structural and clearer answers. "Many enterprises want to use the 4.0 version of the ERNIE Bot model, and are contacting for testing opportunities. Since November 1, we have charged enterprises and consumers for using Wenxin Yiyan service, and we see that more and more people are willing to pay for it."
Big model will bring rapid growth of Baidu AI Cloud
According to the financial report, Baidu Cloud's revenue decreased by 2% year-on-year in the third quarter of 2023. Robin Lee explained that the decline was mainly affected by the intelligent transportation business in the third quarter. If the intelligent transportation part is not included, the growth of the company's overall AI cloud business is very good.
Shen Shao, president of Baidu AI Cloud Business Group, said: "Baidu AI Cloud has always focused on improving the healthy growth and sustainable development of its cloud business. In the past few quarters, Baidu Intelligent Cloud business has achieved operating profits in accordance with non US GAAP."
Baidu AI Cloud is an important carrier for the operation of Baidu Wenxin big model. Luo Rong said that generative AI has brought new opportunities to Baidu Cloud, and more and more customers in different fields are conducting model training. Especially companies in the fields of education, internet, and technology have improved efficiency through AI, which has led to increased spending on Baidu Cloud.
I believe that cloud business will resume positive growth in the fourth quarter, and this trend will continue, "Shen Dou said, We continue to discover growth opportunities brought by generative artificial intelligence and large-scale language model technology. Customers in various industries are using Baidu's services to complete model training, develop applications, and enhance solutions. Although the contribution of self generated artificial intelligence and large-scale language model technology services to the company's revenue is relatively small, the growth rate is fast
Shen Dou also pointed out that Baidu will leverage its leading position in the fields of generative artificial intelligence and large-scale language models to continue attracting new customers and driving existing users to increase their spending on Baidu's artificial intelligence cloud services. This can not only achieve long-term stable revenue growth for Baidu, but also promote the improvement of Baidu's profit margin.