Baidu Fights with AI to Retain Dominance in Search
Baidu, China’s leading search engine, is under increasing pressure from emerging competitors as it strives to maintain its dominance in the search market. With new players leveraging AI technology to enhance their search capabilities, Baidu is pivoting towards AI to stay ahead.
Rising Competition in the Search Market
The search market has become a battleground for various internet companies. On July 10, Alibaba affiliated search engine Quark launched its “Super Search Box,” centered around AI search services. Earlier, on July 1, Tencent’s Yuanbao introduced a deep search function, and DingTalk AI search began its invitation-only testing phase on June 26.
Search engines have always been a prime target for internet companies due to their role as traffic gateways, crucial for information and service distribution.
As content platforms like Xiaohongshu, Douyin, Kuaishou, Bilibili, and Zhihu improve their content offerings, users now have more diverse options beyond traditional search engines like Baidu.
Baidu’s Declining Market Share
Despite still holding the top spot in China’s search market, Baidu’s share has dropped to 55.85% as of May 2024, down from 86.82% in November 2021, according to Statista.
The company has long felt the competitive pressure from other platforms. Baidu’s once formidable moat in search is being eroded as internet platforms develop their own search capabilities.
AI as the Key to Reinvigorating Search
Baidu is betting heavily on AI to revitalize its search business. The company is iterating from traditional search to generative search, aiming to leverage AI to enhance efficiency. However, integrating AI with its commercial model has proven challenging.
In May, Baidu’s management disclosed that around 11% of search results were generated using AI technology.
CEO Robin Li believes that AI could make search services the “killer app” of the AI era. This transformation is part of the 2024 objectives set by Baidu’s senior vice president, He Junjie, who leads the Mobile Ecosystem Group.
While AI search can directly provide answers and streamline the search process, it disrupts the traditional revenue model of embedding ads within search results. The challenge lies in maintaining revenue growth while transitioning to AI-powered search. Other search giants like Google and Bing face similar dilemmas, struggling to balance AI integration with advertising revenue.
Baidu’s advertising revenue has been impacted by the rise of short video and e-commerce ads, which are increasingly favored by advertisers. To combat declining ad revenues, Baidu is adjusting its agency policies and introducing new agents to stimulate competition and innovation among its partners.
AI-Driven Transformation and Content Ecosystem
Baidu aims to leverage AI to enhance its content ecosystem, with products like Baidu App, Baidu Content Ecosystem, Baidu Tieba, Wenxin Yiyan App, and Baidu Marketing all being restructured through AI.
Baidu Wenku, for example, is being transformed into an intelligent document creation platform, comparable to Microsoft’s Office Copilot.
The integration of AI has led to user growth across Baidu’s platforms. Wenxin Yiyan (a.k.a. ERNIE Bot) has reached 300 million users with 500 million daily calls, while Baidu App’s monthly active users hit 676 million in Q1 2024. Despite this growth, the impact of AI on business conversion and ad revenue has been limited.
Baidu remains the leader in China’s search market, but it must prove its ability to adapt and thrive in the AI era. The company faces significant pressure to innovate and maintain its market position amidst evolving consumer preferences and technological advancements.