When it comes to online search, one company dominates like no other: Google parent Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG). In the first quarter of 2017, the company commanded a 79% worldwide market share of desktop search and a stunning 96% in the mobile and tablet category according to netmarketshare.com.
Baidu, Inc. (NASDAQ:BIDU) has been called the "Google of China" and has followed its U.S. counterpart into a surprising number of emerging technologies, including artificial intelligence (AI) and autonomous driving. Baidu is the search leader on its home turf after Google abandoned China because of censorship in 2010.
Baidu is considered to be among the forerunners in both AI and self-driving cars in its native China, but technologically, it lags Google in both. By extending its search to include voice, photo, and video and expanding its reach into virtual assistants, home speakers, and cars, the company hopes to step out of Google's shadow in the rest of the world. It believes its greatest hopes for topping Google lie in the realm of autonomous driving.
If you build it, they will come
Baidu believes that taking a page from the Google playbook might be its best chance at success. In an unexpected move last month, the company announced that it would open-source its autonomous driving technology in an initiative it called Project Apollo. The logic being that by making its self-driving car technology available to all comers, it has a shot at becoming the industry standard, much as Google did with its Android operating system in the cellphone market. Baidu plans to announce some of its first Project Apollo partners in early July.
If that's the case, Baidu has its work cut out for it. Google launched its autonomous driving efforts back in 2009, and after eight years of research, Alphabet's Waymo division, which houses those efforts, may be readying the technology for commercial applications. Waymo recently announced a partnership with ride-hailing service Lyft to help bring its self-driving cars into the mainstream, which will expand beyond the limited locations where the technology has been tested. If this partnership proves successful, it could be a huge revenue generator for Waymo.
Baidu believes its Apollo open platform will grow into an ecosystem and provide the catalyst for success. Baidu's chief operating officer, Qi Lu, has stated that Apollo will surpass any closed system in three to five years. Lu made another bold prediction, saying, "If Apollo performs well, we will catch up with and even surpass Google."
Driving future growth
These developments come at a crucial time for the Chinese search giant. Baidu has been struggling with stagnant revenue in the face of increased advertising regulations in China. In its most recent quarter, the company saw online customers fall 23%, and earnings declined 11% year over year. It wasn't all bad news, as Baidu's remaining customers increased their spending to drive revenue higher by 6.8%. The company hopes that its focus on the future and heavy spending in the areas of autonomous driving and artificial intelligence will pave the way to future success.
There's no denying that the company has made some bold moves, and its leadership at home is a testament to its successes. That said, it will take much more than the proclamations of some key executives to make it so. The open sourcing of its autonomous driving platform may pave the way to future success, and the company has been devoting an increasing number of resources to the development of AI. If Baidu can succeed in regaining its momentum in the area of online search, that will provide the resources necessary to compete in areas like autonomous driving and artificial intelligence.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares) and Baidu. Danny Vena has the following options: long January 2018 $640 calls on Alphabet (C shares) and short January 2018 $650 calls on Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Baidu. The Motley Fool has a disclosure policy.