Editor’s note: This article is from the public micro-channel number, “said Science and Technology” (ID: kejishuo), Author: 007,36 krypton old iron release authorized.
Today Baidu seems to be caught in an awkward situation of “wrestling a million people”.
After the market value was surpassed by the rising stars such as Meituan, JD.com, Pinduoduo, etc., “Baidu is old” became a cyclical topic, and a round of discussion was launched from time to time.
What is wrong with Baidu, and is it possible to revive the glory?We have been thinking about this.
Combining multi-quarter financial reports, we will focus on the research of this article: First, combing the development of Baidu’s core business income in the past more than a year, whether the financial reports, especially the profit and loss statement can be improved in the short term; second, using AI and cloud computing asFocus on the potential of non-advertising business.
Baidu ads are now bottom line
Baidu started with a search business and its business model is mainly advertising.
In the PC era, Baidu has become the most important traffic distribution platform in China, and it has been in the limelight for a while (especially after Google withdrew), but Baidu itself has always been trying to improve the efficiency of this single model of “selling traffic.”
In the past ten years, Baidu has carried out persevering and repeated business model breakthrough plans, such as investment-driven mid-page plans, investing in a large number of vertical fine-grained websites (such as iQiyi, where to go, etc.), andCarried out the C2C e-commerce exploration, launched ah, and then to O2O’s heavy investment to build, and the recent hot AI strategy.
From the operation point of view, when Baidu holds a large amount of traffic, invests in vertical websites, and uses the traffic to pry investment income, this is of course a more efficient business than “selling traffic”. This is also the best time for Baidu, but with the advent of the mobile InternetAs Baidu ’s traffic dominance continues to dilute, investment companies have experienced “shutdown and turnaround”, O2O business has collapsed, financial splits, and after competitors have built strong barriers, Baidu will shift its focus to hand hundred and sponsor the Spring Festival Gala.To increase user stickiness and maintain the bottom line of advertising revenue.
The sway and over-adjustment of the strategy have caused Baidu to miss the online advertising market fighter, which can be clearly confirmed from the advertising revenue.
Today Baidu’s profit focus is still on advertising revenue, which is its current status quo.
In order to objectively express the development trend of Baidu’s core business, we removed the relevant data of iQiyi, see the following figure
Although Baidu’s new business represented by AI accounts for a large proportion in its promotion, the year-on-year growth of non-advertising business is also a big step ahead of advertising business, but so far, advertising still accounts for 83% of Baidu’s core revenue ratio, which means that the currentBaidu is still an “online marketing company”.
However, in terms of growth rate, Baidu advertising has been quite weak. From 2019 to the present, the year-on-year growth rate is mostly in the negative growth range. By Q1 2020, this number even shows signs of accelerating deterioration.
For Baidu, the innovation business is still in the infrastructure investment and loss period. At this time, the advertising business not only shoulders the responsibility of maintaining growth, but also undertakes the mission of diluting the loss of innovation business. If the growth rate slows down, it may affect Baidu ’s core business.Profit margin.
We estimate the gross profit margin and operating profit margin of Baidu’s core business in Q1-2019 Q1-2020, see the following figure-
Combined with the growth of the advertising business in the above figure, it is not difficult to find that the gross profit margin trend of Baidu’s core business is roughly similar to that of the advertising business, which means that the growth of the advertising business will significantly affect the gross profit margin.The gross profit margin is immediately reflected.
The operating profit margin is complicated. In order to reduce the pressure on the income statement, Baidu made adjustments in terms of expenses during the period. It mainly compressed the sales and market expenses. Will this affect Baidu’s operating stability in the future?We do n’t know yet. In short, the cost of the compression period is an important means for Baidu to optimize its income statement.
So, since the advertising business is so important, why is it difficult for Baidu to boost it?
To emphasize one point, the operating data of Shoubai is quite good. The DAU reached 220 million, a net increase of 25 million from the end of Q4 2019.
According to QuestMobile data, during the epidemic, the mobile phone Baidu MAU was close to 540 million, and the number of users continued to climb, but why did the sales revenue not increase year-on-year?
According to the data provided by the QuestMobile report, we first look at the proportion of Baidu ’s core business in the Internet advertising industry, see the following figure
Over the past year, except for the severe epidemic in Q1 2020, the growth rate of online advertising has been roughly stable, at around 15%, but the growth of Baidu ’s core advertising during the same period can be described as ups and downs, in a senseIn fact, Baidu’s status in the rivers and lakes has indeed declined.
Beijing Normal University’s “2019 China Internet Advertising Development Report” once disclosed:
Advertisements from e-commerce platforms accounted for 35.9% of the total in 2019, ranking first with an increase of 3% over 2018; search platform advertisements still ranked second with a 14.9% share, but were higher than 21% in 2018The revenue of video platforms increased by 43% year-on-year, replacing news platforms and becoming the third largest Internet advertising platform.
The status of e-commerce and search advertising is challenged. The sudden rise of video (especially short video) not only undertakes the major increase in online advertising, but also squeezes the market share of veteran companies represented by Baidu.
In the face of the marketing appeal of the combination of product and effect, Baidu’s marketing appeal is challenged by the single product. After solving the activity of Baibai, Baidu needs to enrich the product line and promote the combined launch of marketing.
Not long ago, Li Yanhong personally went live, and the industry also rumored that Baidu will focus on live streaming. Regardless of the result, for Baidu, how to get a new advertising market is one of the most important tasks.
Of course, we can’t sing Baidu too much because of this. The market share of Baidu’s core advertising in Q1 will rebound slightly in 2020. This also shows that when the external environment deteriorates, Baidu’s strong position in search has made the advertising business more competitive.Obvious bottom-line management, which means that although there are many bears, Baidu is not as vulnerable as analysts believe.
However, combined with the opening analysis, Baidu is no longer the Baidu in the PC era, and the control and operation capabilities of traffic are not what it used to be. In the past golden era, Baidu used the flow to spur investment to maximize the value of traffic, and nowWhat kind of breakthrough technique can Baidu have?
Is there any hope for Baidu in the future?
This chapter focuses on the potential of non-online advertising.
Non-online advertising (also called innovative business) has maintained high-digit growth in recent quarters. The main reasons are:
First, driven by Xiaodu speakers, according to Canalys data, the shipments of Xiaodu speakers reached as high as 17.3 million units in 2019, with the market share ranking first in the country. It is conservatively estimated that this part of sales will also be in the range of 2-25 billion yuan, Contributing nearly 1/4 of the proportion of innovative business;
Second, Baidu ’s cloud computing IaaS accounted for more than 5%, and Baidu ’s conservative revenue will be around 2.5 billion yuan, which also roughly contributed 1/4 of the revenue for innovative businesses;
Third, Baidu input method, maps, AI and PaaS business, Apollo and other new businesses contribute roughly 5 billion yuan in revenue. Among them, Apollo is a springboard business for Baidu to enter the industrial Internet, which is of great significance.
As mentioned above, since the innovation business is still in the growth and investment period, if the growth rate is too large than the advertising business, it will obviously affect the performance of the income statement. From the perspective of improving the income statement, the innovation business (especially the business that is still in the loss period)There should be some kind of tacit agreement with advertising growth to reduce profitability pressure.
But at the same time, we also found the impact of innovative business on capital expenditures.
The capital expenditures of Baidu ’s core business have been significantly narrowed in the past few quarters, mainly due to: 1. The pressure on Baidu ’s advertising, especially as the status of rivers and lakes declines, the proportion of previous prepaid advertising fees may have declinedThe capital accumulation capacity of the advertising business is declining; 2. Some businesses have temporarily passed the high investment cycle and entered the stage of inertial growth. For example, in the aspect of small-scale speakers, after mass production is higher, capital investment can be slowed down.
According to the overall growth situation mentioned above, the growth rate of innovative business has not been significantly changed by the reduction of capital investment, which also confirms that some businesses have entered a more stable development cycle.
This is a rare bright spot for Baidu. It is worth noting that due to the reduction in investment, the quarterly fixed asset depreciation provision is also roughly around 1.3 billion. It has not taken the lead and stabilized the performance of the income statement.
That is to say, from within Baidu, the pressure of innovative business on capital and profit has been reduced, and it has won some space for future reforms.
But the value of innovative business to Baidu’s current market value management is still low.
As of now, Baidu ’s P / S ratio does not exceed 3, and at the same time, the byte-beating P / S ratio is roughly twice that of the former. In the capital market, Baidu has an underestimated component compared to the single P / S ratio, but if cash flow is usedIt is not difficult to see that the discount rate valuation model shows that the capital market is seriously skeptical of Baidu ’s growth in the long run.
The fundamental reason is that after the established bottom line in the current advertising market, there have been no signs of declining and rising. At the same time, innovative business has not yet contributed to Baidu’s “new story”.
In other words, although Baidu has invested heavily in AI, the capital market still characterizes it as online advertising revenue, which not only puts higher demands on Baidu’s business, but also on market value management.
Baidu next, after stabilizing short-term online advertising growth, it is necessary to tell new stories, increase capital confidence, and reverse market views with practical actions.
Canalys provided data that in 2020, China’s cars were roughly 21 million units, a decrease of 14% over the previous year. Among them, the demand for electric and intelligent vehicles has increased significantly. Affected by this, the national level of support for electric vehicles is also concerned by the industry. BaiduAs an enterprise that has been emphasizing autonomous driving technology for many years, whether it can seize this opportunity and obtain its own investment return in the industry reform is a great opportunity to change its “qualitative”.
From the perspective of BAT and the comprehensive emerging companies such as JD.com, Meituan, Pinduoduo, etc., only Baidu ’s position in the track is constantly weakening. This is not only a problem of strategic swing in the early stage, but also a result of major changes in the habits of users to the industry.After the sudden deterioration of the external environment in 2020, Baidu is also under the greatest pressure due to the lack of buffer business.
From the perspective of market value management, Baidu needs to accelerate the growth of innovative business. In 2020, online advertising and innovative business are unprecedented challenges.