Future driver

Baidu exits food delivery to focus on AI


Too old-economy for Baidu

To show that it’s at the forefront of artificial intelligence, Baidu found a new way to incorporate its AI technology into its Chinese New Year celebration. When employees at China’s largest search firm used company vending machines last week, many were surprised to find the company’s boss Robin Li pop up on the screen. “Hi, I remember you now,” Li told them. “Don’t worry, I’m Robin. It is my treat today. Thank you so much for all your effort.”

Almost all the vending machines in the Baidu headquarters in Beijing have installed a facial recognition system which identifies a user within a millisecond and has an accuracy rate claimed to be as high as 99.7%.

In another sign that Baidu is staking its future on AI, Chinese media reported this week that the firm has sold its remaining stake in food delivery service Ele.me to Alibaba in a deal that could value Ele.me at around $9.5 billion. For comparison, Ele.me’s biggest rival Meituan, backed by internet giant Tencent, was valued at $30 billion in its latest funding round last year (Meituan also dabbles in group-buying and restaurant bookings and reviews).

Alibaba already owned 40% of Ele.me as of May last year. Baidu injected its own food delivery service Waimai into Ele.me in August in a cash-and-stock merger. Baidu executives have since left Ele.me to pave the way for Alibaba’s eventual takeover, reports Beijing Business Today.

As one of the most widely circulated jokes on the internet puts it: a delivery man at Ele.me, who joined Baidu’s Waimai back in August, laments, “First I was an employee of Baidu, and then I worked for Ele.me, and now I am at Alibaba. But [what’s ironic is that] I didn’t even change jobs!”

The sale is not yet finalised and neither party has made an official announcement. But if it goes through, Alibaba’s Ele.me and Tencent’s Meituan will dominate China’s food delivery service – a business segment that was valued at Rmb200 billion ($31.47 billion) in 2017.

Online-ordered food delivery saw its user base surge more than 40% to 295 million customers over the first half of 2017. The sprawling sector has been growing quickly, with the China Internet Network Information Centre (CNNIC) estimating that 90% of food orders were made from a smartphone.

Baidu’s exit from such a booming industry has reinforced analysts’ belief that Robin Li is repositioning his company to focus more on futuristic businesses such as AI and driverless vehicles

Since last year, Baidu has ramped up resources devoted to a voice-interaction system called DuerOS and an autonomous-driving open source platform called Apollo (see WiC388).

Li recently showcased his driverless car technology during the widely-watched Spring Festival Gala, where a fleet of over a hundred autonomous vehicles, powered by Apollo, zigzagged along the Hong Kong-Zhuhai-Macau bridge in figures-of-eights (an auspicious number in Chinese culture, signifying wealth and fortune).

Baidu has yet to commercialise the self-driving technology, but some of its other AI efforts are already paying off. The search giant announced a 118% increase in fourth quarter operating profits to Rmb4.8 billion. The company credited the growth to AI-powered improvements in its search engine businesses and newsfeed functions.

But while rivals like Tencent and Alibaba continue to expand their scope, the search firm has more or less been relegated to the periphery of China’s tech landscape.

Its market value suggests as much. While both Tencent and Alibaba have surpassed $500 billion in market capitalisation, Baidu is still valued at around $90 billion. Some analysts have even argued that China’s tech industry seems to be reshaping itself into the AT, which stands for Alibaba and Tencent, instead of the BAT trio.

Li and his investors will be hoping his big bets on AI prove transformational – much as digital music, the iPod and the iPhone proved for Apple. After all, those revolutionary products saw Apple’s market value jump close to two hundredfold from its nadir in the late Nineties. Apple today is the world’s most valuable firm but many have forgotten that back then it was a struggling PC maker deemed an irrelevance by fund managers.

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