Baidu adjusted its advertising business, and the sales structure changes aimed at four major industries

Baidu's mobile ecological business adjustment has advanced to the core, and the adjustment of sales architecture means that the entire new closed loop has been opened

Text | "Finance" reporter Gu Lingyu

Edit | Xie Lirong

On March 21, Finance Eleven learned that Baidu's mobile ecological business group recently made a comprehensive adjustment to the sales system.

The mobile ecosystem business group carries Baidu's most important source of profit advertising business. This adjustment will adjust the original sales system composed of KA (large customers), direct sales, channel distribution, and line distribution agents into nine parts, including four major industry departments, namely mass consumption, big health, content consumption, business services, and four departments that cooperate with industry sales. Channel Distribution remained unchanged.

In a simple understanding, Baidu's move has changed the horizontal structure of dividing customer attribution and defining service models according to the attributes of the sales department in the past, and has become a vertical sales system aimed at key industries.

This adjustment is conducive to accumulating industry knowledge and mobilizing industry resources, with the intention of expanding its value to the vertical customers of the industry.

With the return to Hong Kong for listing in March 2021 as the node, Baidu has entered a second entrepreneurial period. At present, Baidu has formed a consensus on the "three major growth engines" of secondary entrepreneurship: the first growth engine represented by the mobile ecosystem, the second growth engine represented by the intelligent cloud, and the third growth engine represented by intelligent driving and cutting-edge businesses such as Xiaodu, AI chips, and Baidu Maps.

The mobile ecosystem (advertising business in the traditional sense) belongs to the first growth engine, which is Baidu's cash cow business. Baidu hopes that the second and third growth engines representing its future technological strength can become stronger and stronger, so that the proportion of the first growth engine will naturally become smaller and smaller.

According to the financial report, Baidu's advertising revenue accounted for 90.1% of total revenue in 2016, fell to 84.9% in 2017, 80.1% in 2018, and 72.9% in 2019, and by 2020 and 2021, this figure quickly fell to 68.3% and 65%.

Shen Ji, executive vice president of Baidu Group, told Finance Eleven that in 2022, Baidu's strategic judgment on the big strategy will not change significantly, and the company's development will further stabilize.

He said that after the construction in 2020 and 2021, Baidu sees new opportunities in the field of servitization and will continue to work hard. If we want to do a good job in servitization, we must have a fuller understanding of the industry and mobilize more industry resources. In 2022, Baidu will continue to make some adjustments to its organizational and collaborative methods, fully serve the strategy of servitization and personalization, and broaden its entrance on this basis. This is the original intention of Baidu to adjust the mobile advertising sales framework this time.

Baidu's adjustment of the sales framework at this time actually has a comprehensive consideration of external factors. In 2021, due to the impact of the epidemic and the macro environment, the online advertising market as a whole tends to tighten. According to the "2021 China Internet Advertising Data Report", in 2021, the size of China's Internet advertising market will increase by only 9.32% compared with 2020, and the growth rate will continue to decline by 4.53 percentage points over the previous year, while Baidu's annual growth rate will barely remain at 12%. This means that advertising platforms should look for increments in the stock market more.

When the cost of advertisers' traffic purchase continues to rise, they must establish a deeper connection with consumers in the stock market, so as to ensure the existence of a value community with users.

In April 2021, Baidu released the mobile ecosystem X+Y strategy, "horizontally expanding the scale of users, vertically deepening the way of vertical industry". In the past three years, around the advertising business, Baidu has launched a series of innovative marketing products and tools, such as hosting pages, enterprise hundred home number, degree star selection and so on. Official information released by Baidu said that these products are now mature and can be customized according to customers in different industries.

From this point of view, the adjustment of the sales architecture has left the latest strategic puzzle on this established "closed loop".

Change and change

Baidu vice president Zhao Qiang revealed that the adjustment does not involve any layoffs, nor does it involve changes in employee work locations, compensation and benefits, the new team is the recombination and deployment of the existing employee organizational structure, but the relationship and docking of customers may change.

According to the "Finance eleven", the adjustment does not involve the original channel distribution system, and the nine parts after the adjustment include four major industry departments, namely mass consumption, big health, content consumption, and business services; as well as the channel ecological cooperation department involving the agent business, the channel sales development department involving regional channels and strategic middle offices, the marketing service contact center that provides operations, the sales management department that provides strategy, supervision, research, data infrastructure, and the sales service department that provides marketing and product docking functions.

Therefore, to understand the deep meaning of this change, it is advisable to place change and invariance in the overall layout of Baidu's mobile ecology.

In 2018, Baidu Search strategically transformed into a mobile ecosystem business group. Two years later, the "search + information flow" dual engine support was officially established. In April 2021, Shen Ji, head of the mobile ecosystem, proposed the strategic upgrade of the mobile ecology service.

Baidu mobile ecology along the "X + Y" layout, Baidu App, intelligent Mini Program, Baijia number, Baidu live broadcast, good-looking video and other products as users in different scenarios of the traffic entrance, while live broadcast, e-commerce, B2B, automotive, big health, etc. to meet the user's vertical service needs in different vertical categories.

Baidu App is at the heart of it all.

Baidu App is currently the largest search + information flow app in China. According to the financial report data, in December last year, Baidu App's MAU increased by 14% year-on-year to 622 million, a record high. However, given that Baidu does not disclose more informative indicators, such as user time and retained data, we cannot judge whether the status of Baidu App in the parent company has changed substantially.

Product-side changes are happening. In the past, baidu apps looked like a super traffic portal to the outside world, providing a treasure hunting hole for other companies. Open today's Baidu App, and the search box is still in an important position. When a user enters a search term, such as "diabetes," the first result displayed is a popular science knowledge of diabetes, including overview, etiology, symptoms, medical treatment, treatment, prognosis, daily, and self-tests.

If you turn the page further down, you will see a link to Baidu Encyclopedia, as well as an online consultation channel Baidu Health, and further down, there are thousands of pages of various diabetes information search results. In the medical field, which has been particularly criticized, Baidu Search no longer displays hospital recommendations on the top search page. Instead, Baidu has created medical knowledge, online consultation, consultation and other sections in recent years.

Therefore, the current Baidu App is to use Baidu's AI capabilities, traffic from third-party applications and websites directly to the closed content ecosystem, another traffic direction, is to lead to third-party content and services with a similar local application experience.

In other words, Baidu tries to solve the multiple needs of users on the same platform for mobile search to expand user scale and enhance stickiness. This is the traffic monetization logic of the mobile ecosystem closed loop.

At this stage, Baidu has built a prototype of ecology and infrastructure. On the 2021 earnings call, Baidu executives attributed the achievements of the mobile ecosystem to the three building blocks that have been working on in the past three years - Baijia number, intelligent mini programs and hosted pages.

According to Baidu's official information, in the past three quarters, Baidu's hosting page revenue accounted for more than 40% of Baidu's core online marketing revenue, and Baidu Mini Programs also exceeded 740,000. The Baidu App "Q&A" currently covers more than 40,000 respondents from 19 vertical industries, and the number of consulting orders in December increased by 60% compared with September. In addition, Baidu Health's daily telemedicine consultation volume maintained a substantial increase in the fourth quarter.

That is to say, for the changing Baidu mobile ecology, it is only a starting point for rapid growth, and the competitiveness of the future mobile ecology depends on the competitiveness of the vertical track, that is, whether it can provide high-quality content and services, so that users can get services in the closed loop.

This is more difficult than the previous stage.

The challenge of the basic disk

In April 2021, Baidu achieved a secondary listing. According to the prospectus, about 40% of the funds raised will be used to further develop the mobile ecosystem and diversified monetization.

At present, Baidu mobile ecology has formed a diversified monetization model, in addition to advertising business, Baidu is also through the network disk, e-commerce and other businesses, to achieve membership, tipping, transactions, business orders and other diversified income.

A veteran of the Internet industry once commented to "Finance Eleven" that Baidu's strategic approach in the mobile ecosystem has no problems, and the challenge lies in how to implement the strategic path. "Baidu hopes to complete the traffic monetization closed loop by accumulating more than 10 years of AI capabilities and knowledge graph development capabilities, and at the same time matching longer-tail third-party content and services through an open platform, the implementation of paths and guidelines is particularly important, otherwise the strategy will be out of shape and the path will deviate from the route."

From this perspective, this change is in line with the overall strategy of Baidu's mobile ecosystem.

Among the leading Chinese Internet companies, Baidu is not the only one whose advertising business accounts for more than 50% of revenue, but the search advertising that Baidu relies on is facing the biggest challenge due to the change of information distribution channels.

According to the "2021 China Internet Advertising Data Report", in 2021, the proportion of the search advertising market fell for three consecutive years, from 17% to 11.9%; at the same time, video advertising continued to grow, the market share has reached 20.4%, and the annual growth rate has further increased from the previous year, reaching 52.68%.

According to the research of GF Securities, the search behavior shows a clear migration trend to the short video platform, and the user penetration rate of the short video platform exceeds 80%, and the corresponding search usage rate exceeds 65%, ranking second in the search traffic ecology.

In addition, at the company level, according to a recent survey by Aurora Big Data, the penetration rate of Baidu-related products is significantly lower than that of Tencent and Byte.

In essence, all parties are competing for online attention, and Baidu's advertising business is also facing strong competition from both. However, in the era when traffic is king, Byte's Douyin and Tencent's WeChat have served as distribution channels for other services of the parent company, and this linkage has always been lacking in Baidu.

In recent years, Baidu's strategic transformation has fluctuated, and the biggest question has never changed: Can search and advertising profits support the sustained high investment required for AI monetization?

At the first quarter of 2021 earnings call, Baidu founder Robin Li once set a goal: with the growth of artificial intelligence business, Baidu's non-advertising revenue will exceed advertising revenue in the next three years. Affected by the epidemic, regulatory policies, market demand and other factors, Baidu will continue to be under pressure in this process. On many occasions, Baidu executives have expressed "cautious optimism" when referring to the advertising business.

In an interview with the media in response to this change, Shen Jidui said that he hoped that "advertising revenue will not decline, but the proportion of advertising revenue will decline." He said, "The development of the entire mobile Internet to the present, a bit like a child grew to 18 years old, at this time the probability is not long, but his knowledge and spirit is still constantly enriched, the same for Baidu App." Although DAU and MAU continue to grow, the value growth expected to users is higher. ”