Coming Home: Baidu Might Return To Chinese Stock Markets

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(Chinese Version)

Li Yanhong, CEO and chairman of the board of Baidu, recently stated to media outlets that Baidu might exit American stock markets and return to China.

From where Li’s standing, Baidu’s O2O business will surpass its search engine service and become the top profit-making product in the future. However, American investors clearly fail to see the potential of O2O businesses. “If one day, I find that there’s no chance for the American stock market to accept Baidu’s value while Chinese stock markets approve of our goals, then we will return home for investment.”

The O2O sector, where the future of Baidu lies in

In Li Yanhong’s opinion, Baidu’s future development lies in the service sector instead of its current main business, the search engine product. By connecting consumers with millions of companies and entrepreneurs in the world with the Internet, Baidu will literally make a great fortune that’s hard to come by. To achieve this goal, despite the oppositions from its investors, Baidu has invested several billion dollars in the service sector, compromising its current profit in exchange of future growth.

Thus, Li aims to take initiatives to take the lead in his so-called “hot service sectors” such as takeout service, movie ticket booking service and cab hailing service. Even though these sectors won’t bring much profit to Baidu at all, Li still believes that such services will help consumers form certain consuming habits, which could be used to Baidu’s advantage in the future.

In order to make this happen, Baidu is investing part of its 12 billion dollars cash reserve and making use of its capital resources as the dominating search engine in China. Baidu now has an enormous marketing team with over 20,000 people and an R&D team which consists of scientists and researchers from Beijing and the Silicon Valley who are dedicated to developing sound recognition, image and deep learning technology and other advanced computer technologies.

During the 2015 Baidu World Conference held last week, Li Yanhong debuted Baidu’s newest tech product Duer, a digital assistant featuring voice control. Compared to the leading force in the field, Apple’s Siri, Duer even appears to be more leading-edge since it can help users buy movie tickets and reserve seats online merely via voice control.

Baidu’s another strategic move is its investment in Uber. Uber’s CEO Travis Kalanick was the second presenter after Li Yanhong, the very CEO of Baidu. At the conference, Travis introduced current development of Uber’s expansion in China and told the audience that Uber planned to make Uber’s service available in another 100 cities in China in the next coming year.

During the past two years, Baidu has been making many similar investments, including its 169-million-dollars contribution to Nuomi. Baidu also had promised that the company would continue to invest 20 billion RMB in Nuomi in the coming three years.

In fact, Baidu is trying to have a third transformation 10 years after its listing by investing heavily in the O2O industry. Just as what Li Yanhong had said, “We transform to better fit the development of the mobile Internet and the Internet+ in China. The core of this transformation is to evolve from connecting people with information to connecting people with services.”

Baidu might return to China’s stock markets

Unlike the past, the O2O industry that Baidu is betting on now confuses American investors.

As a matter of fact, the Wall Street’s impression and evaluation of Baidu are based on its search engine business and the advertising revenue generated from it. But now, Baidu is hoping to become a comprehensive enterprise that has businesses in both the search engine sector and e-commerce sector.

According to Li Yanhong, typical American investors find it hard to understand why Baidu would invest so much money in businesses that aren’t proven to be promising yet. Li stated that Baidu understood better about this market and believed the investments they had made would bring back high return. Therefore, it appears to Baidu that investors will need guidance to further understand this newly-emerged market.

However, investors are still feeling uncertain about these efforts’ potential to succeed. On a Monday, Baidu’s depository receipt slumped by 1.9% to 141.27 dollars on the New York Stock Exchange, adding up the total drop to 38% . And Baidu’s operating profit ratio in the second quarter this year had decreased from the 52% three years ago to 21% due to the company’s large investment in the new businesses. China’s current unstable economy also contributed a lot to the downfall of Baidu’s operating ratio.

“Baidu released its disappointing performance report in the wrong time,” said Brendan Ahern, the managing director of the investment organization Krane Fund Advisors LLC, whose exchange traded fund KraneShares CSI China Internet ETF holds shares of both Baidu and Tencent, “American investors are just not that into China.”

Even though Li Yanhong has every confidence that the investment they are making now will eventually bring back revenues, he’s not sure if the investors have the same patience as he does. He had once publicly stated that besides NASDAQ, Baidu also wanted to enter Chinese stock markets. However, according to Li Yanhong, Baidu now might exit the American market entirely and return to China.

“If one day, I find that there’s no chance for the American market to accept Baidu’s value while the markets in China approve of our value, then we will return to China’s stock markets,” Li concluded. “Anyhow, we have patience for the investors in the America. We will give them time to understand us, and hopefully they will approve of or even appreciate our value one day.”

[The article is published and edited with authorization from the author @TMTpost-Chinese, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.