Baidu bets its future on AI revolution

Wei climbs into her car and tells it her destination. While the car manoeuvres through the morning traffic, her news app picks the stories she is most likely to enjoy and reads them aloud. As the car approaches the parking lot, a camera recognises her face and opens the gates.

This is the future that China’s search engine giant Baidu envisages, where artificial intelligence has made phone screens and computer monitors obsolete.

The AI revolution will be the next industrial revolution, the company says. The problem, as Baidu admits, is that it has already been late to the mobile revolution.

When desktop-based browsers were the portal to the internet, search engines found it easy to generate revenues. But mobile interfaces limited the number of adverts on a screen, as well as dividing up the internet into closed app-based fiefdoms, such as Tencent’s WeChat, which have become their own portals to the internet.

Baidu was the slowest of China’s “big three” tech companies to create an interconnected “ecosystem” of mobile apps. Its revenue growth has lagged behind that of e-commerce giant Alibaba and Tencent.

“Somewhere along the line, Baidu forgot that they were an advertising platform like all internet giants,” said Philip Beck, an early investor in Baidu and chair of Dubeta, a private equity firm.

Instead, Baidu is now betting on becoming the AI hegemon of the East, harnessing China’s internet-savvy users — who are also the world’s biggest online data-generating population — as a vital resource for AI research.

The company is in partnership with the government to build the country’s first national AI research laboratory in Beijing. Baidu increased its R&D spending to $464m from April to July this year, 28 per cent more than in the same period a year ago.

“Baidu’s AI potential is transformative for China,” said Lawrence Burns, investment manager at Scottish fund Baillie Gifford, a long-term investor in the company.

Projects in the works include Apollo, Baidu’s operating system for driverless cars. By the end of this year, the company plans to share with its partners technology for driving in simple urban conditions, and by the end of 2020, it is hoping to sell fully autonomous cars.

Then there is DuerOS, Baidu’s system for Amazon Alexa-style “conversational” personal assistants, which is aimed at a Chinese-language market so far under-served by Amazon and Google.

But the main challenge facing Baidu now is how to…

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