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Li Baihong, Lu Qi and other Baidu executives read the financial report and enter the brand advertising area through information flow.

via:博客园     time:2018/4/27 20:02:11     readed:911


On April 27, Beijing time, Baidu announced today its unaudited financial results for the first quarter of 2018 as of March 31. According to the financial report, Baidu’s total revenue for the first quarter was 20.9 billion yuan (approximately US$3.33 billion), an increase of 31% over the same period of the previous year, of which mobile revenue accounted for 78% of the total revenue from the previous 70%; The net profit was 4.6 billion yuan (US$728 million), a year-on-year increase of 128%. The operating profit margin was 22%, compared with 13% in the same period of last year.

After the financial report was released, executives such as Baidu's chairman and CEO Li Yanhong, COO Lu Qi and CFO Yu Zhenghao attended the subsequent analyst financial report and conference call to interpret the key points of financial reports and answer analyst questions.

The following are the main contents of the analyst Q&A session:

Bank of America - Merrill Lynch analyst: Can you tell us about the performance of your news stream advertising products in the first quarter? Can you talk about your opinion on the news flow advertising price in the industry, such as eCPM (effective thousand display price)? Because it seems that the eCPM of this industry, especially some of your competitors, has risen a lot. Therefore, the management feels that the overall news flow industry has the potential for commercial liquidity as a whole.

Lu Qi: You asked two parts about the performance of Baidu’s news flow advertising products. First, the news flow information product experience is a natural extension of our search platform advertising. We can use existing product technology, Based on the customer (to develop this product), at the same time, the news information flow also brings us the opportunity to enter the brand advertising field, because its user experience is at the top of the user advertising consumption, so the news information flow advertisement helps us to enter this An opportunity area.

Specifically, the company is constantly enriching our advertising products, such as open screen advertising. When you open a Baidu application, you will get a very attractive and highly visual advertising experience. The performance of this advertisement is very good. In addition, we have previously failed to provide Baidu information flow GD (guaranteed delivery) ads, can provide very effective brand advertising to specific advertisers. More importantly, many of the existing advertising products can be naturally applied to information flow advertisements. Combined with these, we believe that Baidu’s advertising products will have a very good development situation in the future.

Regarding the industry-wide eCPM, let me first focus on the nature of our advertising products. The so-called effect advertisements are essentially a kind of transformational economy. So, as long as we can continue to use artificial intelligence (AI) technology and better data. By increasing the conversion rate of assets, we will be able to increase CPM over a period of time. In this area, we see that there is still a lot of room for growth for Baidu in the future.

Yu Zhengyu: To clarify, open advertising is not part of information flow advertising. Just as Lu Qi discussed it from the perspective of the company's overall advertising business. And, indeed, information flow advertising allows us to get more budget from advertisers. In the first quarter, information flow advertising revenue increased slightly from the fourth quarter of last year.

Citigroup Analyst: My question is about technology. Can you introduce the application of Reinforcement Learning technology in Baidu Phoenix Nest's online marketing system, which industry advertisers will benefit from? Similarly, for your oCPC (Optimized Cost per Click), which is after "optimized", in addition to cars, which industries will benefit from these new features in the coming year?

In addition, can we quantify how much the company's new technologies in the past few months have helped improve the commercialization of the company?

Lu Qi: First of all, let me talk about the company's new infrastructure based on reinforcement learning deployed in the first quarter. The background is that we know that machine learning is a powerful help for the development of many businesses in many industries. Reinforcement learning is a way of machine learning. Its most important feature is that it does not require the use of tag data, but directly through actual activities. Data, including browsing, clicks, and conversion data, is learned, so learning is more efficient.

Second, reinforcement learning technology can intervene and use more data signals, so it can improve economic benefits and the quality of advertising can be further improved.

Thirdly, reinforcement learning, which we call an online learning, means that we do not need to train the model online before transferring it to online, which means that learning is faster. As we all know, the underlying technology of Alpha Dog and Alpha Meta is reinforcement learning, and reinforcement learning has also been used in other applications. In the area of ​​online advertising, this is a new technology that we have deployed. Over time, this technology will help our ads produce better performance.

The second question is about some of the products we mentioned, especially oCPC. Because the essence of oCPC is to use conversion rate as a benchmark for optimization, not only can it be used to increase conversion rate, but also can increase the efficiency of advertisers' budgets. Apply to almost all advertisers. Of course, our technology will be applied preferentially to large-scale and meaningful industries. However, we expect that oCPC will eventually be applied to all industries, including search advertising and information flow advertising.

Yu Zhengyi: I’ll give you a practical example about oCPC. Baidu’s system is based on traffic, but for advertisers in many industries, they want more certainty. For example, if you’re an application developer, you’ll What you want to know is not the cost per click, but the cost of advertising each time a user goes to look at your app and downloads your app. In some industries, such as the auto industry, advertisers may want to know one Signature ah how much the customer's advertising costs.

Baidu has accumulated rich user data over the past many years, plus the company's AI computing power, can predict the CPA (cost per action each time the cost per action) according to the advertiser's text, pictures and keywords. The actual cost of the user's actions brought about by the advertising, and helps advertisers to optimize the advertising content to increase the return on investment. Because of the certainty that this brings, many advertisers are willing to spend more money. For our long-standing advertising industry, we have a lot of data to help them optimize. This is our potential.

Morgan Stanley analyst: My question is about the progress of your autopilot technology. We know that Baidu's Apollo project has just passed its 1st anniversary. I know that the development of the project is still at an early stage, but Do you sum up what Baidu has achieved in the past year in the field of automated driving? What else can be done better? In view of the increasingly fierce domestic competition, what is the focus of the company's future development?

Lu Qi: First of all, the Apollo project has made several important advances in the past year. The first one is platform capabilities. We initially deployed Apollo 1.0 in the short term, and now Apollo 2.5, platform capabilities and Technology advances rapidly; second is the health of the ecosystem, our developer community, an increasing number of partners, more institutions and government agencies to accept and support our platform; the third point is productization and commercialization, using Apollo Luo platform, our partners launched L3 and L4 levels of self-driving vehicles much faster than we expected.

In the future, we will continue to improve our technical strength, but it is even more important to accelerate the commercial and commercial realization of vehicle products. For example, we mentioned that this year, one of the company's partners will release a commercial L4-class minibus. In the next few years, we will have several automobile manufacturers working with us to produce commercial vehicles for L3-class vehicles.

If we continue to do these things, the Apollo platform will continue or respond to the advantages of competition. We also mentioned in the previous conference call that the Apollo platform has a very clear business model. We are very similar to the Android platform. The platform and technology are open to the outside, but we will also sell Baidu's services. Just like Google open Android platform for everyone to use, while providing Google services.

Barclays analyst: Regarding the company’s second-quarter earnings guidance, if it does not include iQiYi, Baidu’s core business growth will accelerate in the second quarter. What are the main reasons? Is it a core search business or a news flow business? Since the beginning of April, the regulatory authorities have started a new round of content review. The company’s competitors, today’s headlines and other news applications, are temporarily blocked in major application stores due to non-compliance. Users cannot download these applications in the short term. , then do you think Baidu will benefit from it, whether it will get additional advertising revenue from competitors?

In addition, in the first quarter, Baidu’s operating profit margin improved significantly, and the company’s profit margin in 2018 is expected to shrink in 2018. After the strong operating profit margin in the first quarter, the company still maintains its profitability. What is the original expected profit rate for 2018?

Yu Zhengyu: In our performance guidelines, we have considered iQiyi as part of the company's business and combined them together. No specific figures can be disclosed. We expect the second-quarter growth rate to be similar to the first quarter.

Regarding media content review, we mentioned at the beginning of the event that Baidu is committed to providing users with a good product experience for a long period of time, providing clean and healthy content, rather than inappropriate content that can attract eyeballs for a short period of time. We hope to provide users with the most suitable, high-quality and diverse content through artificial intelligence technology.

Li Yanhong: To sum up, our strong growth performance forecast in the second quarter was mainly attributable to technological innovations aimed at users and advertising clients. Changes in the regulatory environment have little impact on us.

Yu Zhengyi: Regarding profit margins, last year was a big year for Baidu's business. Last year we had O2O, Baidu Demon, and some other businesses that have now been spun off. Last year was a year of change. We adjusted our strategy. , become more clear. Nowadays, all businesses are centered on artificial intelligence and move to the mobile side, where there are a lot of synergies, whether it be search, information flow or autopilot. The increase in operating margins in the first quarter is the result of these synergies and leverage. We are still looking for growth opportunities in the search business.

Goldman Sachs analyst: I have an artificial intelligence problem. I know that the commercial application of autonomous driving technology is still in an early stage, but you have just referred to a commercial vehicle twice. So, I would like to know what you think is the automatic driving of commercial vehicles. Which passenger vehicle will be listed first? Which type of car has a greater commercial prospect?

Lu Qi: First of all, the driverless technology vehicles we mentioned in the business words are referring to passenger cars. The L4-class autopilot we mentioned is a 6-seat passenger car later this year. It is commercially available, and several other partners will be listed in the next year or the next year. The self-driving car is a sedan, L3 level, that is, it also needs the driver to sit in the driving position, but the vehicle can complete the automatic driving task and will continue to improve. Driving skills. These are commercial passenger cars, not commercial trucks or logistics vehicles.

Secondly, in terms of business opportunities, we want to emphasize the need for deployment through relatively slow and controlled circumstances. This is the key. There are many commercial opportunities that can be adopted, and users and customers are willing to pay. The six-seater passenger car is a good example. Because there is already a lot of interest, we can imagine that deploying such vehicles in a tourist park within an industrial park can be slow and controlled. Safety can be guaranteed. The same is true for L3 vehicles that we will introduce next year.

In addition, I would like to talk about the commercial application of unmanned technology in the commercial vehicle and passenger vehicle fields. Baidu cooperates with more and more commercial vehicle customers, such as logistics vehicles, trucks, etc. because of the higher speed of these vehicles. Low, the use of the environment is more controllable, deployment opportunities in this area are very large, growth is also very fast, Apollo is ready to seize these opportunities.

Finally, regarding the business model, Apollo's business model is to provide an open platform for free use, but our partners need to use some of our key services, such as maps, what I call maps are highly accurate sensors for the devices. Maps used, not mobile maps used by ordinary users. This is part of our key business model.

86 Research Analyst: Can you accept the company's progress in realizing the short video field? What is the company's strategy for short video production?

Second, "small" at home "What new product release plans this year? How much sales can you expect to have? When can DuerOS partner with the company begin to contribute revenue to Baidu?

Li Yanhong: Short video is a very important content form of Baidu application. In the news information flow business, the proportion of short video content grows very fast, from 10% to nearly half, and the demand is very large.

In terms of commercialization, we are also constantly improving the ability to realise short videos. We believe that future profitability will be very high.

Lu Qi: There are great business opportunities for voice assistant and dialogue products in the future. For Baidu, we have a go-go combination for equipment products, hoping to drive usage and user stickiness to help the DuerOS platform. More powerful.

This includes Baidu's home-made products and partners' branded products (third parties), and the small degree at home is what we call the second party, that is, it is made by our strategically-cooperated manufacturers. The cooperation with us is very close. The brand, user experience, operation, design and engineering of this product are jointly completed by both parties.

We are very satisfied with the sales momentum of this product. At the same time, in 2018, we expect that DoerOS will also publish several DuerOS products with partners. The first is smart speakers with image display. We think that such products will become the remote control for future smart homes because of the visible screens. This type of product becomes more user-friendly, easier to operate, and better able to execute instructions. Users gradually use these products more for content consumption, communicate with family members, and may develop learning and medical care. In terms of applications, we will make more homemade and third-party hardware products in this area.

In addition, DoerOS is also used in many other types of devices, such as smart speakers without a screen, such as communication and voice control between various rooms in a relatively large house.

In terms of business and economic efficiency, the revenue model of Baidu's open platform is multi-layered. First, all types of equipment provide Baidu with a future entrance. For example, we can provide users with information, services, and content through these devices. Of course, advertising is also natural. Things, in fact, we have already started doing this kind of advertising cooperation with Doos OS with equipment vendors. Second, DoerOS is a platform. Like any platform, we can earn revenue by authorizing and collecting commissions, but these are all It is a long-term prospect. In the short term, we must focus on product development and improvement.

Credit Suisse analyst: My question is about competition. How does management see the increasingly fierce competition in the smart home and auto-driving markets? Will Baidu increase investment because of competition?

Lu Qi: In the competitive aspect of autonomous driving, in our key market, China, based on all the competitive landscapes we see in this market, we believe that Baidu has the ability to constantly improve the commercialization capabilities and technological advantages of autonomous driving technology. The important reason.

The first is that Baidu invested in autonomous driving four years ago. It was earlier than most competitors. Therefore, our technical strength is stronger. Second, Baidu adopts an open platform strategy. As a result, almost all automobile manufacturers are very We are happy to adopt our technology, and the government departments have therefore cooperated and provided support with us. For example, in the list of the first four new generations of artificial intelligence open innovation platforms in China, the Apollo platform has been designated as the automatic driving platform.

The competition in the field of conversational artificial intelligence is also very fierce. In fact, it is more intense than you can see. However, despite this, Baidu is still in a dominant position for several reasons. First, Baidu has a combination of speech recognition and natural language understanding. The technical capabilities of capabilities, and more importantly, Baidu’s knowledge maps, benefit from the company’s accumulation of search business in the past 18 years. To really understand the meaning of users, conversational AI requires a huge knowledge map. Otherwise you cannot really understand the user.

Second, Baidu's search engine can provide very rich, Internet-based services and content services. For example, smart speakers with image display capabilities require very strong content assets, and Baidu has a strong content asset due to its search engine business. Including Baidu Encyclopedia of knowledge and other vertical areas of content.

In addition, the most important thing is the speed of innovation. In particular, the combination of software and hardware will also provide conditions for the company to maintain its advantages in the field of conversational artificial intelligence.

Deutsche Bank analyst: Which of the two voice-based conversational AI products and autonomous driving do you think will grow faster?

Lu Qi: With regard to the autopilot and business model, basically when we negotiate with the automakers on the same line every week, we will find new commercial scenarios where Baidu’s technology may be deployed. Overall, this area is accelerating growth. For example, at this week's Beijing auto show, we discovered some new cooperation scenarios with some depots during the exchange.

For Baidu’s economic opportunities, HD maps are a long-term opportunity. In the long term, the potential of the service itself is very significant. Despite this, we still plan to enter the future of business opportunities, Apollo platform can bring more and more business opportunities and models for Baidu.

For example, we previously publicly mentioned building "Apollo Computing Units" (ACU). In essence, Baidu invested a lot of R & D forces in it. It is a box-shaped hardware with sensors and silicon, and silicon. You can use NVIDIA or Intel, you can also use Baidu's own silicon solution. This product may have rapid growth and future business opportunities.

We also mentioned other new services at the Apollo 2.5 release, such as some cyber security services and business opportunities.

Smart conversational artificial intelligence products, the deployment speed depends on the degree of acceptance of product testing, in the United States, Echo became explosive because Amazon's vigorous promotion. In China, this market will also experience similar structural changes, and we believe that Baidu will move forward to play the role of this highly recommended product. We believe that this product will be a small speaker product with image display function because of the situation in the Chinese market and the United States. The market is very different. When this product is generally accepted by the market, Baidu's platform will be popularized and used by more products to bring a new traffic portal to Baidu. In addition to the entrance, there are business models such as advertisements, platform authorizations, and application stores.

Piper analyst: What is the ratio of company's news information flow advertising revenue in the first quarter? What are the growth trends in the next few quarters? Your goal is still to grow by 20% quarter-on-quarter?

Yu Zhengyu: As I mentioned earlier, information flow advertising revenue rose slightly in the first quarter. As we all know, the first quarter is usually a standalone machine in China's advertising industry, but our information flow advertising revenue has still seen a slight increase. We expect the second quarter's sequential growth will be even greater.


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