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What's the Latest News in the US Internet Industry?

PART:
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Part 14
What's the Latest News in the US Internet Industry? PART 14 OF 15

Baidu Is No Longer at Ease

WeChat stirs things up for Baidu 

Escalating rivalry among China’s Internet companies could threaten Baidu’s (BIDU) stability and prospects. In May, Tencent Holdings (TCEHY) decided to add a news feed and web search functions to its WeChat app. The move appeared designed to challenge Baidu for Internet users’ and online advertisers’ attentions.

While Baidu is the largest Internet search provider in China, WeChat is the country’s dominant social messaging app. In addition to being a messaging app, WeChat also supports other digital services such as mobile payments and online taxi services.

Baidu Is No Longer at Ease

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Keeping WeChat users out of Baidu

Tencent’s move to add a news feed and search functions to WeChat can be seen as part of its efforts to keep WeChat users from straying to rival platforms, especially Baidu. This move could reduce traffic to Baidu, which could, in turn, hurt the company’s advertising business. Baidu, a primarily ad-funded company, generated revenue of ~$2.5 billion in 1Q17, ~$50.0 million less than its consensus estimate.

Tencent doesn’t allow Baidu to index its WeChat content. Baidu has also faced web indexing restrictions from Alibaba (BABA), the largest e-commerce platform operator in China.

Competition for talent

Besides trying to wall Baidu’s platform, Tencent has also tried to frustrate the company by poaching its talent. In March 2017, for instance, Tencent hired artificial intelligence (or AI) expert Zhang Tong from Baidu. Tong was leading Baidu’s Big Data Lab before he left to work for rival Tencent.

Like Alphabet’s (GOOGL) Google, Facebook (FB), and Amazon (AMZN), China’s Baidu, Alibaba, and Tencent are betting on AI technology to improve the user experience and better monetize their platforms.

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