Innovations And Acquisitions: Baidu’s Moves In 2014

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Baidu (NASDAQ:BIDU) was able to set itself apart from many of its competitors in 2014 in two primary ways. The first was the high emphasis on innovation that has led to several new products. Secondly, the company’s acquisitive nature has opened up new lines of business. Below we discuss these two focus areas for the company.

We have a $211 per share price estimate for Baidu’s stock, which is slightly below the market price.

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Innovations In 2014

Baidu made several upgrades to its products and services in 2014, as well as introducing new products. It released a new version of its Baidu Antivirus 2015, version 5.0. The company claims 20% faster computer scans, and reduced memory usage while scanning with this update. Baidu has also developed a smartphone accessory that will measure blood pressure. In late 2013, the market for blood pressure monitoring was estimated at $6-7 billion with an expected annual growth rate of 7-9%. Its uncertain how much of this market Baidu can hope to corner eventually (see Chinese Internet This Week: Baidu’s New Moves).

Baidu has also made a foray into crowd-funding movies. It launched a website called Baifa Youxi, in association with Taiwan’s Central Picture Corporation, Citic Bank and the DeHeng law firm in Hong Kong. One movie project, titled Golden Age, has raised $29.3 million from about 3,300 followers using this service (see Chinese Internet Firms Turn To Crowd-funding). Baidu has also partnered with Nokia to use its Here mapping services on its maps app for desktop and mobile for Chinese users traveling abroad. Having a larger user base that actively uses its apps during international travel can enhance advertising revenues for Baidu. Additionally, the company introduced a more accurate transcription software.

Baidu is also known to have ambitions of using its data analytics capabilities to create smarter hardware. A Baidu-BMW partnership aimed at automation of specific functions including parking and adaptive cruise control of cars was announced in 2014. Another partnership was with Seagate, aimed at low cost online storage, archiving and data analysis. The agreement also allows for joint research on three new technologies: cold storage, big data analysis and shingled magnetic recording (SMR) (see Baidu Inks Strategic Research Agreements With Seagate and BMW). Baidu is also making a smart bicycle called Dubike that will monitor health metrics such as heart rate and blood-pressure during cycling. The bike comes equipped with GPS and maps services (See Weekly Chinese Internet Notes: Baidu In Focus).

Investments In Other Companies

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. The company has good growth potential, as the Brazilian e-commerce sector is expected to grow by 18% annually through 2016. It was estimated to have reached $13 billion in 2013 (See Chinese Internet This Week: Baidu’s New Moves). Baidu has grown in the group buying space in China through acquisitions, when it completed the buyout of Noumi from Renren in January 2014. It currently has a 10% market share in China (see How Can Baidu Grow Its Group-Buying Business?).

Baidu has also acquired online payment service provider 99Bill.com. The deal is supposed to be valued at $326 million. 99Bill offers several services such as currency remittance and withdrawal, service bill payments and other online payments. Baidu also invested $10 million in mapping software maker Indoor Atlas in 2014. Indoor Atlas helps locate the position of people and things within buildings, and is currently promoting this software as a way for retailers to increase their sales. The idea is for retailers to track customers’ movements within a building and to send promotional offers or other alerts when they approach that retailer’s store. [1]

Baidu also invested $3 million in sports video production startup Pixellot. Baidu’s investment in this startup is believed to be targeted at generating quality sports content for its online video portal, IQiyi (see Chinese Internet Notes: Baidu, Sina And Perfect World In Focus). Finally, Baidu confirmed its investment in ride sharing company Uber in December 2014. Baidu is expected to leverage its user base and competency in online search to facilitate the growth of Uber in China (see Weekly Chinese Internet Notes: Baidu’s Latest Moves).

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Notes:
  1. Baidu Invests In Indoor Atlas []