Baidu's voice assistant and smart device business is valued at $2.9 billion after cash injection - CNBC

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A security personnel stands guard at the opening session of Baidu's annual AI developers conference Baidu Create 2019 in Beijing, China, July 3, 2019.

Jason Lee | Reuters

GUANGZHOU, China — Chinese internet giant Baidu has raised an undisclosed sum of money for its business division focused on voice assistants and smart devices. 

The new funding for Baidu's "Smart Living Group" (SLG) values that business at 20 billion yuan or $2.9 billion. CPE, Baidu Capital and IDG Capital participated in the investment round. 

Baidu runs a platform called DuerOS which it calls a conversational artificial intelligence system. DuerOS allows devices to use Baidu's voice assistant so users can communicate with hardware by speaking to it. For example, Baidu has its own range of smart devices under a brand called Xiaodu which includes speakers and wireless earphones all equipped with its voice assistant. 

But DuerOS is also an open platform, meaning other hardware makers can also install it on their devices. 

The outside funding will give a cash injection to one of Baidu's divisions that could be key to its long-term growth as it faces stiff competition in its core business. Baidu is China's biggest search engine and makes money from advertising.

China's advertising market has been hit by the coronavirus pandemic. Pre-pandemic, digital ad spending in China was forecast to rise 13% in 2020, according to eMarketer. The research firm now estimates it will rise only 5%, to $75.33 billion.

Over the past couple of years, Baidu has faced rising competition in search as Chinese internet users continue to move away from web browsers to so-called "super apps" like Tencent's WeChat. These sorts of apps lets users access services and search all within one platform. 

Baidu has its own super app called the Baidu App which continues to grow. Daily active users reached 204 million in June. 

But part of Baidu's strategy has been to try to diversify its revenue stream, putting an emphasis on areas from artificial intelligence to driverless cars and healthcare. Its Smart Living Group is involved in that effort with voice assistants playing a key role. 

And analysts see potential here for monetization. 

"We believe Baidu remains on-track for double-digit revenue growth over the longer-term," Mizhuo analysts said in a note earlier this month.

Mizhuo said they "feel comfortable with that goal" as the company has yet to monetize investments such as voice search "which makes up roughly 20% of the search volume and its mini-program platform." 

Mini-programs refer to apps within the Baidu App. It means users don't need to go to a separate app store to use certain services. 

Baidu said the investment into the Smart Living Group is expected to be completed in the fourth quarter of 2020. The Chinese company will hold "super voting rights" in the business group and is expected to continue to consolidate the financial results of SLG, as a majority shareholder.

Meanwhile, Baidu is in talks with investors to raise up to $2 billion over three years for a new biotech company, CNBC earlier this month reported. It will be a standalone entity that would focus on using artificial intelligence to create new drugs and make early-stage diagnoses of diseases. 

September 30, 2020 at 12:28PM
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Baidu's voice assistant and smart device business is valued at $2.9 billion after cash injection - CNBC

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