Baidu faces revenue decline, banks on AI to stay competitive

Despite its declining quarterly revenue, Baidu, in its statement, assured people that its leading position in AI in China will position it to navigate the increasingly competitive market. The comment comes from an AI price war in China, where companies are increasingly lowering the prices of large language models powering generative AI technologies.

Ernie, Baidu’s large language model, has been integrated into various applications to enhance user experience and is touted to be a competitor to OpenAI’s GPT. According to Baidu CEO Robin Li, the company’s Ernie platform processes over 600 million AI requests daily, the highest volume among Chinese firms. Li added, ‘Competition will be fierce over the next 2 to 3 years.’

As China’s dominant search engine, most revenue comes from ads. However, the company has strategically pivoted to AI by investing significantly in the sector to position itself as an ‘AI company’. The company has expanded its AI offerings by introducing a paid version of its Ernie-powered chatbot for public use and offering API services to developers via cloud computing. “Our advertising business is currently facing pressure caused by a combination of external factors and our proactive efforts to accelerate the AI-driven renovation of search,” Li said during a conference call with analysts.

Why does this matter?

The dipped revenue indicates Baidu’s difficulty in transitioning from search ads to AI as China faces an economic slump. Baidu’s news of prioritising AI as its search revenue stalls can be located as a part of the broader tech trend where, with the AI gold rush, companies increasingly look to increase their AI portfolios to ensure they retain their competitiveness and don’t fall behind in the AI market that is expected to accrue massive business value.