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Robin Li, CEO of search giant Baidu. Photo: AP

Robin Li issues call to arms as Baidu slumps to first loss since 2005

  • Baidu founder Robin Li tells senior managers that saying ‘I have tried’ is not enough
  • Baidu posts first quarterly net loss of 327 million yuan (US$47.5 million) since 2005 IPO
Baidu

Win the battles that need to be won. Be bold. Execute flawlessly. Stop finding excuses. Work hard. Fight harder.

These are messages from Baidu co-founder and chairman Robin Li Yanhong, who has again taken to the pen to stir the company’s more than 42,000 employees to action, as the Beijing-based search engine operator reported its first-ever quarterly loss since going public in 2005.

“2019 is not only a year of challenges, but also a year of opportunities. In the coming months and days, the whole Baidu family, from the senior management to all employees, must work hard and fight harder,” Li said in the memo, a copy of which was obtained by the Post.

“For senior managers, saying ‘I have tried’ is not enough and we need to make sure we win in the battlegrounds that we must win; for employees, we must spare no effort to make sure every task is executed flawlessly.”

Baidu has had a stranglehold on search in China with 70 per cent of the market, especially after Google exited in 2010. But a shift in internet usage patterns has chipped at that dominance, with the rise of self-contained super-app ecosystems by rivals like Alibaba and Tencent. A user could quite easily watch a movie, read news, shop online and order takeaway food without having to leave one of these walled communities or go to a traditional search engine.

Meanwhile, the rise of start-ups like ByteDance, with their AI recommendation-driven news and short-video apps Toutiao and Douyin, are challenging the original trio known commonly as BAT, for the attention and wallets of China’s more than 800 million internet users.

Robin Li Yanhong, founder and CEO of Baidu, talks to media after the closing ceremony of CPPCC on March 13, 2019. Photo: Simon Song

Baidu on Friday reported a net loss of 327 million yuan (US$47.5 million) for the three months ended March, about 75 per cent more than what analysts had estimated. That compared with better-than-expected quarterly profits at Alibaba and Tencent. Baidu’s American depository receipts fell in extended trading.

The search giant saw its advertising business slow further amid the cooling down of the Chinese economy and fiercer competition not just from Tencent and Alibaba but also upstarts like ByteDance.

The company forecast second-quarter revenue between 25.1 billion yuan and 26.6 billion yuan ($3.74 billion and $3.96 billion), representing a drop of 3 per cent on the low end and a 2 per cent increase on the high end of that range. The weaker outlook is a shift from recent years, when Baidu reported robust revenue gains.

The challenges brought by slowing Chinese economy, higher government scrutiny on content and rising competition has started to weigh down Baidu’s online marketing business at the end of first quarter and is likely to further dampen Baidu’s revenue in the following quarters.

Li said the company is “taking a cautious view” on online marketing business in the near term amid the challenging environment.

“When we look at changes in marketplace, there are things that out of our control, such as macro,” Li said in a conference call on Friday after the earnings release. “We will focus on things we can control, such as improve user and customers experience, therefore improving conversion.”

The company also selectively rejected some medial customers to reduce the risk of its advertising business to set a more solid foundation for growth, according to Herman Yu, Baidu’s chief financial officer.

“The macro uncertainty, such as the escalation of trade war, has made advertisers be more cautious in marketing spending,” Raymond Feng, an analyst with Pacific Epoch, said in a phone interview. “With Xiang Hailong’s departure, Baidu will need time to reform its sales network,” he said, adding it is hard to estimate when Baidu can regain its momentum.

Baidu, hand-picked by the Chinese government as a national champion in artificial intelligence, is banking on newer services such as newsfeed, short video, autonomous driving and its DuerOS AI service to remake itself into a mobile-driven AI-powered company.

Daily active users on its Baidu App reached 174 million and daily active users of Haokan video exceeded 22 million as it ramps up spending to try and attract users to its new businesses.

Back in January, Li warned that “winter is coming” as China’s economy shifts to a lower gear and challenged employees at Baidu to step up their game.

Li ended his latest memo exhorting Baidu’s staff to “push for new boundaries” and not to “take for granted that we have been doing must be right.”

This article appeared in the South China Morning Post print edition as: Baidu staff urged to be winners amid losses
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