Baidu focuses on AI as founder Robin Li hires new management team

After a turbulent 2016, during which 13 per cent was wiped off Baidu’s market value, founder Robin Li needs all the help he can get to put the dominant search engine operator in the world’s largest internet market back on track.

During the past four weeks Li has rehired Melissa Ma, his wife and lifelong business partner, and poached at least three executives from Microsoft, Xiaomi and a Chinese local startup to join his senior management team, underscoring the company’s push to regain its traction after an advertising scandal in May destroyed consumer confidence and provoked a rare rebuke from the Chinese government.

“The addition of Microsoft’s Lu Qi as chief operating officer deepens Baidu’s management depth. In particular, his experience at Microsoft and background in artificial intelligence allows him to take a more active role in operations and frees up [Robin Li] to work more on strategic issues,” said Kirk Boodry, an analyst with New Street Research, which has a “neutral” recommendation on the stock.

“We also think this highlights Baidu’s focus on new technologies moving forward as the choice of COO does not appear to give special consideration to the core search segment. And that makes sense as we expect growth in the search business to moderate as the move to mobile has resulted in a more competitive market for advertising budgets from social media platforms like Weixin, QQ and Weibo,” he said.

Boodry added that his firm is not changing the neutral rating as it is still cautious on the stock because of slower search revenue growth, a situation that has not changed.

Baidu’s top down decision-making process slowed down strategy execution and has seen the company fall behind rivals Tencent Holdings and Alibaba Group in the shift towards the mobile internet. Alibaba owns the South China Morning Post.

Baidu’s market valuation is currently about one quarter that of its main competitors, especially after its core online advertising business took a big hit after the death of a young cancer patient who sought an alternative treatment advertised on a Baidu link. The scandal tainted Baidu’s image and prompted the government to step up controls over paid online listings.

Last week, Baidu appointed former Microsoft executive Lu Qi , a leading expert in artificial intelligence, as its group president and chief operating officer, giving the software industry veteran oversight over all aspects of Baidu’s business from sales to technology development.

“I want to gradually take the day-to-day management work off my shoulders,” Li said at a media briefing at the company’s headquarters in Beijing. “I think I will be spending a little more time on investing.”

The sense of crisis and the desire to get Baidu back on top of its game pushed Melissa Ma, Li’s wife, to rejoin the company as a special assistant to the chairman. Ma, who introduced herself as Li’s life companion for 21 years and business partner for 16 years, asked in an internal meeting last week: “We were the largest internet company by valuation in China. What happened in the past four years?”

By taking the vice president-level role, she said she hopes to act as “a bridge between everyone and Robin”, ensuring that strategies are executed in a timely manner.

One of the biggest strategies Baidu has been pursuing is artificial intelligence, an area in which it holds advantages in talent and technology and has made aggressive moves to apply the technology to driverless cars.

Lu, the architect behind the artificial intelligence and bots strategy at Microsoft, is seen as an ideal person to steer Baidu towards its new growth phase.

“I think Lu Qi can bring his experience in developing AI to Baidu’s platform. Baidu has been actively developing AI technology in recent years and it can benefit from his expertise and experience related to AI,” said Ricky Lai, an analyst with Guotai Junan.

The changes are expected to have a positive impact on the company but insiders and analysts remain cautious on whether the new management team can develop the required chemistry to make Baidu great again.

Yin Sheng, an independent analyst who has followed China’s internet sector for nearly a decade, said the management changes will fuel Baidu’s new drive to seek growth powered by artificial intelligence.

“The reshuffle in management provides Baidu the entrepreneurial spirit, the industry vision and the revolutionary management style it needs for its shift to AI,” he said.