Robin Li issues call to arms as Baidu slumps to first loss since 2005

This article is co-written by Sarah Dai.

Win the battles that need to be won. Be bold. Execute flawlessly. Stop finding excuses. Work hard. Fight harder.

These are messages from Baidu co-founder and chairman Robin Li Yanhong, who has again taken to the pen to stir the company’s more than 42,000 employees to action. The Beijing-based search engine operator reported its first-ever quarterly loss since going public in 2005.

Robin Li, Baidu’s co-founder and CEO / Photo credit: Baidu

“2019 is not only a year of challenges, but also a year of opportunities. In the coming months and days, the whole Baidu family – from the senior management to all employees – must work hard and fight harder,” Li said in the memo, a copy of which was obtained by the Post.

“For senior managers, saying ‘I have tried’ is not enough, and we need to make sure we win in the battlegrounds that we must win; for employees, we must spare no effort to make sure every task is executed flawlessly.”

Baidu has had a stranglehold on search in China with 70% of the market, especially after Google exited in 2010. But a shift in internet usage patterns has chipped at that dominance, with the rise of self-contained super-app ecosystems by rivals like Alibaba and Tencent. A user could quite easily watch a movie, read news, shop online, and order takeaway food without having to leave one of these walled communities or go to a traditional search engine.

Meanwhile, the rise of startups like Bytedance – with its AI recommendation-driven news – and short-video apps Toutiao and Douyin are challenging the original trio known commonly as BAT for the attention and wallets of China’s more than 800 million internet users.

Baidu on Friday reported a net loss of 327 million yuan (US$47.5 million) for the three months ended March, about 75% more than what analysts had estimated. That compared with better-than-expected quarterly profits at Alibaba and Tencent. Baidu’s American depository receipts fell in extended trading.

The search giant saw its advertising business slow further amid the cooling down of the Chinese economy and fiercer competition not just from Tencent and Alibaba but also upstarts like Bytedance.

The company forecast second quarter revenue between 25.1 billion yuan (US$3.74 billion) and 26.6 billion yuan (US$3.96 billion), representing a drop of 3% on the low end and a 2% increase on the high end of that range. The weaker outlook is a shift from recent years, when Baidu reported robust revenue gains.

The challenges brought by slowing Chinese economy, higher government scrutiny on content, and rising competition has started to weigh down Baidu’s online marketing business at the end of first quarter and is likely to further dampen Baidu’s revenue in the following quarters.

Li said the company is “taking a cautious view” on online marketing business in the near term amid the challenging environment.

“When we look at changes in marketplace, there are things that [are] out of our control, such as macro,” Li said in a conference call on Friday after the earnings release. “We will focus on things we can control, such as improve user and customers experience, therefore improving conversion.”