Chinese Internet This Week: Baidu’s New Moves

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This Chinese Internet note looks at Baidu’s (NASDAQ: BIDU) new business and technology forays over the past week. Baidu announced the release of a faster and lighter version of its anit-virus. It is also developing an operating system for smart bicycles in the U.S. It released a smartphone to monitor blood pressure. It also bought a controlling stake in a Brazilian group buying firm. We review these developments, which we believe are a part of the continuing effort of Baidu to grow away from its core business of Internet search and online advertising.

See our complete analysis of Baidu here

New Antivirus Released

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Baidu released a new version of its Baidu Antivirus 2015, the version 5.0. The company claims 20% faster computer scans, and reduced memory usage while scanning with this antivirus. Furthermore, it claims that the antivirus has a more intuitive interface to make scanning for viruses easier. [1] We have written earlier on how Baidu may have a significant revenue opportunity in its computer fine-tuning program, PC Faster (See Market Potential For PC Faster). The anitvirus is used alongside PC Faster. Together they represent Baidu’s foray into cyber-security.

The international market for cyber-security is forecasted to be worth over $150 billion by 2019. [2] The market for anti-virus is highly fragmented. Microsoft controls 23% of the market, with Avast coming in a distant second at 16%. ((Antivirus And Threat Report)) If Baidu can break into this market and claim a market share of about 10%, its revenue potential in 2019 from this product could be up to $15 billion. Given the rapid growth expected in China of Internet Services, the challenge to such a development is likely to be Baidu’s small footprint in the international arena. Despite its small presence outside China, it has managed to reach the 70 million download mark for its PC Faster software. This makes us hopeful of Baidu’s prospects in this segment.

More Hardware Explorations

Baidu has been experimenting with hardware development with projects relating to semi-autonomous cars, smart eye-wear and even a pair of smart chopsticks that can gauge the purity of ingredients used in ones food. It is now coming out with a system that will make working out by cycling smarter. Baidu has come out with a software that can add new functionality to smart bikes, which are bicycles with a computer in them. This system will enable users to keep better track of calories burnt and distance traveled. Riders can operate the bike through voice commands. The bike will have measure to safeguard itself against theft, and also will facilitate social networking and recharging of other devices. [3] While we do not have data on the market potential of smart bikes, Baidu’s technology could prove a useful addition to electric bikes. The market for electric bikes is expected to reach $11 billion by 2020. [4] Supplying software for these devices could prove an attractive opportunity for Baidu to gain a part of this revenue.

Baidu has also developed a smartphone accessory that will measure blood pressure. It has partnered with another Chinese company, Mumu Health Technology to develop this device. It connects to smartphones via Bluetooth, and shows the heart rate and blood pressure on the phone display. The device is expected to have compatibility with the iOS and Android devices. [5]  In late 2013, the market for blood pressure monitoring was estimated at 6-7 billion dollars with an expected annual growth rate of 7-9%. [6] Its uncertain how much of this market Baidu can hope to corner eventually. The competition is however pretty hot in this segment. Mobile phones manufacturer Xiaomi had also come out with such a device before Baidu. Their’s is however a wired device developed in association with a health technology partner based in Silicon Valley. [5]

Baidu Expands Its Group Buying Business To Brazil

Brazilian online group buying company Peixi Urbano was bought over by Baidu. Peixi Urbano has more than 20 million customers and 30,000 merchant partners in Brazil. It claimed to have helped customers save $1.24 billion since its inception in 2010. The Brazilian e-commerce sector is expected to grow 18% annually till 2016. It was estimated to have hit a size of $13 billion in 2013. [7] This provides Baidu an opportunity to make up for its late entry into group buying by expanding internationally. Baidu had strengthened its online group buying business in China by buying Noumi, which currently has a 10% market share.

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Notes:
  1. Baidu Announces Antivirus 2015 []
  2. Cyber Security Market By 2019 []
  3. Baidu Developing Smart Bikes []
  4. Electric Bicycles To Be A $11 Billion Industry []
  5. Baidu Launches Mumu BP2 [] []
  6. A Device For Measuring Blood Pressure []
  7. Brazilian E-Commerce Market In 2013 []