Baidu, China’s top internet search leader, is seeing promising results from its ChatGPT-style Ernie bots. Despite a challenging economic situation, Baidu reported a 6% rise in revenue to 34.4 billion yuan ($4.8 billion) in the third quarter of 2023. The company estimates that its AI model, Ernie, will contribute hundreds of millions of yuan in additional ad revenue in the final quarter of the year. Baidu’s shares even rose over 1% in pre-market trading, showing that Ernie is generating some serious buzz.
However, Baidu is not without its challenges. The Chinese economy’s recovery remains uneven, and there are concerns about a deflationary spiral. Baidu’s revenue growth has been lackluster, barely growing from the previous quarter. To compete with domestic rivals like Alibaba and Tencent, Baidu launched its own generative AI platform, Ernie Bot. Within three months, Ernie Bot attracted 70 million users and has been praised for its capabilities, even matching GPT-4.
Baidu’s billionaire founder, Robin Li, assured analysts that the company would invest in the growth opportunity presented by Ernie, reallocating resources from lower-priority efforts. Additionally, Sandy Xu, the CEO of JD.com Inc., will join Baidu’s board as an independent director. Baidu recognizes the weakening of e-commerce marketing, which accounts for about a tenth of overall ad sales.
Although Baidu’s growth may have slowed, it remains a frontrunner in China’s AI industry. The company has integrated Ernie into its flagship products and charges a monthly subscription fee for its latest chatbot. Baidu also operates a cloud service that supports AI services. As AI models continue to develop, Baidu sees inferencing, or hosting AI models, as a potential long-term source of revenue.
While the road ahead may have its bumps, Baidu’s commitment to AI innovation and adapting to changing market dynamics shows that they are determined to stay at the forefront of the industry.
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