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How Baidu Ruin It’s Own Empire With It’s Search Engine


Do you know about Baidu? People said it is the Chinese version of Google. Let’s take a look at this company and see how its performance.

Baidu was originally the absolute leader in China’s Internet industry. The B in BAT refers to Baidu, which was once ranked first among the Big Three. The other two are Alibaba and Tencent.

baidu

Originally, its market value surpassed that of Alibaba and Tencent, but if we take a look at the recent closing price, Baidu’s market value is $106.8 billion, while Alibaba’s is $730.5 billion and Tencent is $935.8 billion. This means Baidu’s market value is less than 1/10 of Alibaba and Tencent. If we make a comparison of their revenue and profit, the gap is even widening.

In terms of market value, Baidu is no longer ranked in China’s Internet industry. Not to mention that compared with Alibaba and Tencent, even JD and Pinduoduo’s market values are greatly exceed Baidu as well.

JD’s current market value is $155.0 billion, while Pinduoduo is $241.1 billion. This means that Pinduoduo’s market value is more than twice of Baidu.

Grieving of Robin Li

The Baidu CEO, Robin Li, should be very frustrated when seeing all these. So it’s no wonder that there was a rumor in the market that Baidu was planning to delist from the US stock market. It should also be because Robin Li was not satisfied with the valuation given by the market.

And now media love to use Baidu as a unit of valuation when they do a comparison to other companies. They like to say that certain company is now 5 times of Baidu or such. Sure Robin Li will get mad when he sees this.

Why The Company Turns Out Like That?

Why is a once an Internet giant now degenerate into a valuation unit and made fun of by many people? In fact, for a technology company, the core is still people, especially its founder. So, if you want to study Baidu, you naturally need to study Robin Li in the first place.

Robin Li Background

Robin Li was born in 1968 in Yangquan, Shanxi. In 1987, He graduated from Yangquan high school with the first-place result and admitted to Peking University. He majored in Information Science.

Robin Li once said with the brilliant result that he got, he can actually enter any university that he wants. He ended up not going to Tsinghua University which is the most popular university in China is because he needs to study for 5 years at Tsinghua University. He doesn’t want to spend so many years studying.

From here, we can know that Robin Li is indeed very good at studying. After he entered Peking University, what in his mind is about going abroad.

In 1991, Robin Li got an offer from the State University of New York at Buffalo and his major is computer study.
After getting a master’s degree from this university, he decided to leave without taking the Ph.D. He explained that his interest is not in academics.

His ambition is to create something that can be used by hundreds of thousands of people, something for academic research.

He ever said that if a problem has been raised for many years but everyone is still researching on how to solve the problem, even if the problem eventually being solved, it actually won’t have much impact on the practical world.

So, you can tell from what he said in which he is someone who values short-term business benefits. This means he is more concerned about making money and he just hopes to make money as soon as possible.

Robin Li got several job offers at the time from Silicon Valley and Wall Street. Among them, Wall Street gave him the highest offer, with an annual salary of $54,000, plus project bonuses. Without a doubt, he chose the offer from Wall Street.

He said: “Ph.D. graduation deserved this amount of salary”, which shows that he is quite satisfied with the salary he got.

Hop to Infoseek

Then at an academic conference, he met Infoseek CTO, William Zhang. After a talent show, Robin Li was appreciated by the CTO and successfully got a job-hopping offer.

And since it’s a job-hopping, I believe the salary must also be well discussed. So Robin Li left Wall Street to Silicon Valley and worked as a chief engineer at Infoseek.

He really lived up to expectations and helped the company successfully launch a second-generation search engine, which became the first mainstream search engine to use hyperlink analysis.

Infoseek began to have a good reputation in the industry. By 1998, the company was acquired by Disney. And this acquisition also lets Robin Li made a lot of money.

He said: “The option I got is $5. And a year later it rose to 100”. Robin Li suddenly became a millionaire and he then decided to leave Infoseek.

He said: “I don’t want to go to work for another company anymore. I don’t want my fate to be controlled by others”.
After Infoseek was acquired by Disney at a high price, it was closed by Disney just two years later, because the company lost money every year.

But this has nothing to do with Robin Li anymore since he has successfully cashed out the money from his options. He then chose to return to China to start a business.

Inception of Baidu

On January 1, 2000, Robin Li recruited 5 programmers in Zhongguancun. It only took 4 months to come out with a brand new search engine.

Regarding this experience, Robin Li said:
“Even though I can create the search engine myself, but I can’t do it because I just came out of a search engine company, and come out something that is similar to the search engine company can cause myself in legal risks. Therefore, I just recruit programmers to help me to do the job. I communicate with them and help them to solve some core issues in some places.”

From there, we can know that Robin Li’s idea was to rely on the search engine to make money by charging a certain service fee every year to his clients.

In May 2000, he sold the first set of search engines at the price of $80,000 for a year, and the buyer was Silicon Valley Power.

Same year September, Baidu received its first venture capital from DFJ and IDG who invested US$10 million in Baidu.

By 2001, Sohu, Sina, ChinaRen, and many other companies have become Baidu’s clients. Baidu at this time has basically monopolized most of the portal search engine business in China.

But this actually means Baidu has no more room for future growth, and it is already difficult for the company to find new clients.

Business Transformation

Therefore, Robin Li believes that this business model of selling search engines is no longer possible. A business model that he has always thought of before is ranking bidding. He thinks this will be a much larger business compare to selling search engine service.

So he decided to make a major strategic transformation. This means in the future, he will no longer sell search engines. Instead, he will directly face the market by launching a search website, which is similar to Google.
However, his idea was hardly supported by anyone in the company. There was also objection from the board of directors. The directors said unceremoniously:

“At the time we invest in Baidu, we were not aiming for this thing”.

However, Robin Li was determined and quarreled directly with these directors. It is said that he has been arguing for three hours.

In the end, Robin Li was mad and said, “I won’t do it either, and everyone just doesn’t do it. We just shut down the company”.

In the end, the directors had no choice but to agree with Robin Li’s opinion. The strategic transformation has become a starting point for Baidu to take off.

After the company’s business is going smoothly all the way, the business model of ranking bidding is indeed a money churner. Very soon, Baidu made a step forward by listing in the United States.

The company successfully listed on the Nasdaq on August 5, 2005. Baidu’s IPO price was $27, it then rose by 354% within that day, and it was well-received by the market. In the following years, Baidu also maintained a trend of rapid growth.

In 2011, Baidu’s market value exceeded $50 billion for the first time. It became a veritable Chinese company on Wall Street, and the limelight was overwhelmed Alibaba and Tencent at that time.

Robin Li himself was awarded the title of “Nasdaq Global Outstanding Entrepreneur” by Nasdaq. In 2011, the wealth of Robin Li also surpassed Wahaha’s CEO Zong Qinghou, with a net worth of US$9.4 billion and became the richest man in China. But after that, Robin Li’s fortune seemed to take a turn for the worse.

Wei Zexi Incident

The first is the Wei Zexi incident in 2016. To put it simply, it was the victim Wei Zexi, who received an unapproved and unconfirmed treatment plan at a hospital recommended by Baidu, which caused delays in treatment, and Wei Zexi finally passed away in April 2016. This incident then began to heat up and caused Baidu’s stock price to plummet.

Chinese state media also made a severe criticism. Baidu was ordered to rectify and was required to clean up and rectify medical commercial promotion.

On October 17th, 2016, Robin Li went to the University of Science and Technology of China to give a speech and was getting a riot by the audience. On the signature wall, there was a student who wrote the name of Wei Zexi.

Baidu’s staff had to block the signature with their bodies. During the speech, someone shouted:

“Robin, you are a liar!”

In July 2019, when Robin Li was giving a speech at the Baidu AI Developer Conference, suddenly a man rushed onto the stage with a bottle of water in his hand and poured it on Robin Li’s head.

So it seems that in a short period of time, the former richest man in China, together with the Internet entrepreneurial elite was suddenly collapsed.

Now on the Internet, as long as someone mentions Baidu or Robin Li, many people will follow suit and scold it. It seems that scolding Baidu has become a trend.

Why did the Baidu Empire decline so quickly?

I think a theory of an investment guru, Duan Yongping, can explain this problem well. That is his theory on corporate culture. Because Baidu’s corporate culture is not good where it has always been only focusing on money and short-term profits. It is too short-sighted with the only pursuit of profit, which eventually led to the decline of Baidu.

Why did the Wei Zexi incident happen? In fact, it’s all because the company is to pursue short-term profits. The company will sell everything that can be sold, and as long as whoever gives them more money, they can get better search rankings in Baidu.

And since Putian hospitals are willing to pay a high price to buy Baidu’s ranking, Baidu will naturally not refuse the money. But this is actually a very short-sighted behavior because the user is not actually a fool. Yes, you can fool the users once or twice, but if users continue to be fooled, they will eventually realize and they will lose trust in the Baidu search engine. This is just what actually happened to Baidu.

Those good companies tend to pursue other things instead of money. The first thing a good company focuses on is its own products. If your products are really doing well, then making money will follow suit.

Kazuo Inamori, who is known as the sage of Japanese management, once said:
“Don’t chase the profit, let the profit chase you”, which carries the same meaning as what being mentioned earlier.

Because if you keep on staring at money, you tend to be short-sighted, and in the end, you will inevitably do something that hurts long-term benefits. Baidu is a typical example. On the other hand, good companies often sacrifice short-term benefits for the long-term good.

For example, Amazon, Google, Huawei, and Tencent all have such characteristics. Of course, the corporate culture of a company is created by people. Therefore, Baidu’s corporate culture was a reflection of Robin Li’s own personality.

If you study his history and look at his series of words and deeds, you will find that he really values short-term interests and does not have a long-term perspective.

For example, what he often talks about when holding call conferences is all kinds of revenue, profit, market share, and other financial data. This shows that he only concern about money and not other things.

But if a CEO likes to stare at these short-term numbers, it will cause him to fail to see a larger industry development trend and industrial pattern behind the numbers.

We can see how many unfinished businesses that Baidu started. For example, the company did dabble in e-commerce before, and later in group purchase O2O, but the company just couldn’t stick to it.

In fact, there is a huge gold mine in these two areas. Looking at it now, these two arenas have produced 4 companies with huge market capitalization which are Alibaba, JD, Pinduoduo, and Meituan. Baidu just missed them all.

Short-Sighted CEO

The root cause is that the company pays too much attention to short-term benefits. So, once there is a new business that cannot make money after a period of time, they will call it off. Either they got closed or sold to others.

Even though Baidu has launched a lot of new businesses, but in the end nothing been. Until now, the company’s business still depends on the search engine in the PC Internet era.

It is basically unachievable in the mobile Internet era. Recently, I have seen many people say that Baidu is betting on AI and autonomous driving, which will help Baidu to regain its past glory. But I just not too believe these will make a change to the company.

If they just aimed for short-term speculation to push the stock price, then I think it is possible. But to say that Baidu has regained its glory from then on, I think it is very unlikely.

First of all, we can look at some objective data. The new business that Baidu currently announces is AI plus cloud. The revenue in the latest Q3 financial report is 2.9 billion yuan, and the year-on-year growth rate is 14%. This percentage of growth rate is certainly cannot be considered as a high-growth business.

Go Into Electronic Vehicle Business

For the company’s autopilot car business,(some rumors even said they will go into self-made electric vehicles), I also think the chances to materialized is very slim.

First, let’s talk about autopilot cars. This not only involves technical issues, but it’s also more on an ethical and legal issue. For example, if an autopilot car is out of control, it may hit the pedestrian in front, will the autopilot system able to tell which one should you bump into? Should we just trust the computer and let them handle human life?

If we want to have an efficient autopilot system, we will need all people to choose autopilot. But many people just like to drive by themselves and enjoy the fun of driving. Can you force these people to drive autonomously? Do they still have the freedom to choose to drive by themselves?

There is also the issue of safety. In fact, the autopilot system has been on airplanes for many years, and the technology is also very mature. The airplanes even have fixed routes, but all these still not able to completely prevent airplanes from crashing.

Many experts believe that the crash was caused by a problem with the aircraft’s sensors. In this case, who can guarantee that the car’s sensors or radar will not malfunction?

Moreover, the cars are driven on the ground, and the roads are generally crowded. Compared with the flight routes, it is definitely more prone to various emergencies.

As long as the self-driving car has the possibility of causing major traffic accidents, I believe that most people will still want to control their own destiny, and not let the machine control their lives and safety.

Therefore, in the future, fully autopilot driving is basically impossible. In the future, the car will still retain the steering wheel and manual control mode. The driver needs to sit in front of the steering and always pay attention to various emergency situations.

In this case, we can‘t call it autopilot driving anymore. They can only be regarded as a kind of computer-assisted driving.

Especially in the China market, autonomous driving is even more difficult to achieve. Because the road conditions in China are very complicated, all kinds of battery cars can come from any direction, and many drivers do not follow the rules of traffic.

So, in such a situation, if the autopilot driving is turned on, it may give the driver a lot of stress. In the end, he will still want to drive the car himself.

Autonomous driving is more suitable for roads there are fewer cars and people. If Baidu wants to build its own cars, I think this should not be reliable. If they just start to want to build the electronic vehicles, I think they already late for the party.

Now not only a variety of new China car-making forces have risen, but also major traditional (fuel) companies have also started to build their own electronic vehicles.

So I really can’t see what competitive advantage does Baidu has. Of course, if Baidu makes such an announcement just because they want to push the stock price for a while, then it is doable. But if they are really serious about making electronic vehicles, I’m just not very optimistic about the company’s long-term prospects.

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