Baidu: Findings Its Way In Maps And Navigation Services

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Baidu (NASDAQ: BIDU) invested $10 million in mapping software maker Indoor Atlas in September 2014. While the deal size itself was small, the incremental revenue to Baidu from the use of this technology could be huge. This was also the latest in a series of moves in the navigation services space made by the three giant Chinese Internet companies that go by the acronym BAT- Baidu, Alibaba (NYSE: BABA) and Tencent (HKG: 0700). [1] In this article we take stock of their forays into maps and navigation services.

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The Competitive Landscape

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Baidu previously bought out digital maps and navigation company RITU, giving it access to RITU’s navigation product Daodaotong. [1] Daodaotong at one point claimed a leading 31% share of China’s digital maps market. [2] This acquisition helped bolster Baidu’s capabilities in the navigation segment, which it entered in 2012. In April 2014, Alibaba, which owned 28% of maps competitor Autonavi, bought the rest of Autonavi for $1.5 billion. [3] Alibaba had earlier invested $35 million in another digital map maker and navigation service provider, Emapgo, to become its biggest shareholder in 2010. [1]

Tencent entered the digital map space by offering street-view maps through its search engine Soso.com in 2011. It was later renamed Tencent Maps. It initially used data from Autonavi’s maps. Last year, it acquired map service Linktech Navi for $9.92 million, which gave it surveying and mapping capabilities. The company has claimed that it has mapped street-views of more than 2 million kilometers of roads in over 100 cities in China. Baidu has also launched a street-view service after acquiring street-view map service Changdi Wanfang earlier. [4]

Baidu’s Investment In Indoor Atlas

Indoor Atlas helps locate the position of people and things within buildings. This cannot be done accurately with the GPS used to help navigate outdoors. [5] Indoor Atlas’ app helps pin-point the location of the smartphone to within a two meter radius. [6] This is more accurate and cost-effective than the wi-fi or bluetooth technology used currently to triangulate a smartphone’s location.

Indoor Atlas is currently promoting this software as a way for retailers to increase their sales. The idea is for retailers to track the consumer’s movements within a building and to send promotional offers or other alerts when they approach that retailer’s store. This deal gives Baidu exclusive access to Indoor Atlas’ software in China. A Baidu spokesperson commenting on the deal said that the accuracy and scalability of Indoor Atlas will help complement Baidu’s existing location based services. [6]

Revenue Potential From The Deal

There is revenue potential from this deal on two fronts. Firstly, Baidu has entered into a $813 million joint venture with Tencent and real-estate developer Dalian Wanda. [7] This JV is seen as the first step in challenging Alibaba’s dominance in China’s e-commerce and the broader online to offline (O2O) industry. An important part of the strategy is to drive consumer traffic to stores in Dalian Wanda’s shopping centers. To this end, Indoor Atlas’ technology could help Baidu guide prospective consumers to relevant stores, and possibly even the relevant shelves therein. Baidu could also offer its advertising customers the ability to offer deals to mobile users of its app, which would help these companies target consumers near stores that sell their products.

The second aspect in which this technology could be advantageous to Baidu is in its car navigation services. The indoor accuracy can help Baidu use this technology to help shoppers find parking spaces and navigate basement parking areas. This could help Baidu charge a premium from car manufacturers for its navigation product. Additionally, it makes Baidu’s maps application more attractive to users by providing seamless transitions between indoor and outdoor spaces.

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Notes:
  1. BAT Bought Five Biggest Chinese Navigation And Map Providers [] [] []
  2. RITU establishes navigation R&D center []
  3. Alibaba Agrees to Buy Autonavi []
  4. Tencent Acquires Linktech Navi []
  5. Indoor Atlas Raises $10 Million From Baidu []
  6. Baidu Invests In Indoor Atlas [] []
  7. Baidu Boosts Location Based Platform []