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

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

Is There a Crisis at Baidu?

Talent outflow

In recent months, Baidu (BIDU) has suffered a string of executive departures, which its management has largely downplayed. For investors, frequent talent outflows could raise questions. Such developments could disrupt key projects or hint at underlying trouble for the company.

In May 2017, Baidu witnessed the exit of its content chief, James Lu, who oversaw the company’s service businesses such as music, games, and movies. Lu was also in charge of Baidu’s largest advertising network, which is responsible for between 60.0% and 70.0% of the company’s overall revenue.

Is There a Crisis at Baidu?

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Key departments rattled by leadership departures

The departure of Lu in June followed a series of talent departures from key departments at Baidu in March 2017. In March, the company lost its autonomous driving head, Wang Jing, its chief scientist, Andrew Ng, and its Big Data chief, Zhang Tong, with their departures occurring only a few days apart. In November 2016, Li Mingyuan, who had come to be known as the prince of Baidu, resigned as the company’s vice president.

Save for Mingyuan, whose departure was linked to a scandal, the other executives left either to work for Baidu’s rivals or to run their own businesses to do the same things Baidu had hired them to do.

Diversifying beyond advertising

What could be troubling is that Baidu is suffering an outflow of star talent at a time when it’s facing escalating competition from sohu.com (SOHU), Qihoo 360 (QIHU), Tencent (TCEHY), and Alibaba (BABA) for advertisers’ budgets.

Though Baidu’s 1Q17 revenue rose 6.8%, its operating profit fell 9.3% to $291.4 million, as we can see in the chart above. To cope with these challenges, Baidu has been attempting to diversify its revenue sources by expanding into areas such as cloud computing, self-driving automobiles, and artificial intelligence, some of the departments recently hit by its leadership outflow.

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