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6 Things You Didn't Know About Baidu, Inc.

By Leo Sun - Mar 6, 2017 at 1:37PM

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Did you know these six things about the “Chinese Google”?

Many tech investors are probably familiar with the basic facts about Baidu (BIDU -0.93%) -- it's the biggest search engine in China, it has a growing ecosystem of cloud-based services like Alphabet's (GOOG -3.47%) (GOOGL -3.30%) Google, and it benefited greatly from Google's exit from the mainland Chinese market in 2010.

Those are the bullet points in the growth story that boosted Baidu stock by nearly 1,500% over the past decade. But today, we'll take a look at six lesser-known facts about the "Chinese Google" which many investors might have overlooked.

Baidu's Image Search page.

Image source: Author's screenshot.

1. CEO Robin Li cut his teeth in the U.S. tech industry

After earning a master's degree in Computer Science from the University of Buffalo, Baidu co-founder and CEO Robin Li worked at Dow Jones & Co.'s IDD Information Services and search company Infoseek in the 1990s.

At IDD, Li developed the software for the online version of The Wall Street Journal and invented his patented Rankdex site-scoring algorithm for SEO rankings -- which currently powers Baidu's search engine. At Infoseek, Li created the image search function, which was subsequently used in Disney's network. After spending over five years at those two companies, Li returned to China and co-founded Baidu with investor Eric Xu in early 2000.

2. Baidu is developing driverless cars

Like Google, Baidu believes that autonomous electric cars would be a natural extension of its data mining ecosystem. The company started testing out driverless cars on public roads in late 2015, and formed a driverless tech research center in Silicon Valley last April.

Two passengers sit in a driverless car.

Image source: Getty Images.

Baidu is powering these vehicles with a combination of NVIDIA's automotive chips, HERE Maps, and its own AI algorithms. It's currently outsourcing production of these vehicles to Chinese automakers, and has declared that it will launch an autonomous shuttle bus by 2018.

3. It's beefing up its AI efforts

For search engines like Baidu and Google, AI plays a key role in recognizing images, analyzing search patterns, and deciding what types of targeted ads will appeal to users. That's why Baidu hired a lot of top talent in AI -- its chief scientist Andrew Ng previously helmed the Google Brain AI project, and its new augmented reality chief Qi Lu was previously an AI specialist at Microsoft.

Baidu hasn't been shy about challenging Google in the AI arms race. In January, it pitted its AI program against Google's AlphaGo AI in a series of facial and voice recognition tests in a live TV broadcast.

4. Baidu owns a small stake in Didi Chuxing

Baidu previously invested in Uber's Chinese division, but Uber eventually retreated from the market due to tough competition -- especially from market leader Didi Chuxing. Uber sold its Chinese business to Didi last August, but retained a 17.7% stake in the new subsidiary. Baidu and Uber China's other shareholders received a 2.3% stake.

That stake is small, but Baidu could boost it and more tightly integrate Didi's services into its O2O (online-to-offline) ecosystem. Didi could also play a key role in automating Baidu's driverless cars.

5. It owns a big part of Ctrip

Baidu owns a 25% stake in Ctrip (TCOM 10.79%), the largest online travel agency (OTA) in China. For years, Ctrip was engaged in a price war with its primary competitor Qunar (QUNR), which crushed both companies' margins.

Baidu owned a 45% stake in Qunar, but it swapped that stake for a 25% stake in Ctrip in 2015 -- which effectively merged the two companies and ended the price war. That move also tethered Ctrip's services more tightly to Baidu's growing O2O ecosystem.

6. Baidu also sells smart bikes

In late 2014, Baidu introduced DuBike, a bike equipped with a wide array of health and motion sensors which sync to a mobile app. It also features on-board navigation signals, which let riders follow directions without glancing at their phones, and lets riders share their routes with friends. To top it off, the entire system is powered by a rider's kinetic energy -- so the bike never needs to be recharged.

Baidu's DuBike.

Baidu's DuBike. Image source: Baidu.

The key takeaway

The heart of Baidu's business is still search-based advertising, but that could gradually change as its efforts in driverless cars, AI, its O2O ecosystem, and even smart bikes pay off. Therefore, investors should keep an eye on these adjacent efforts as the company trades blows with other tech titans -- like Tencent and Alibaba -- over the next few years.

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Stocks Mentioned

Baidu, Inc. Stock Quote
Baidu, Inc.
$153.79 (-0.93%) $-1.45
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,240.15 (-3.30%) $-76.52
The Walt Disney Company Stock Quote
The Walt Disney Company
$95.92 (-0.71%) $0.69
Microsoft Corporation Stock Quote
Microsoft Corporation
$256.48 (-3.17%) $-8.41
NVIDIA Corporation Stock Quote
NVIDIA Corporation
$159.82 (-5.26%) $-8.87 Group Limited Stock Quote Group Limited
$27.22 (10.79%) $2.65
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
$45.65 (-3.33%) $-1.57
Qunar Cayman Islands Limited Stock Quote
Qunar Cayman Islands Limited
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,251.43 (-3.47%) $-81.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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