How Baidu’s AI Push Has Affected Its Costs
AI innovation driving R&D spending
Baidu’s (BIDU) expenses have risen steadily in recent years with notable increases in the cost of revenue and R&D (research and development) spending.
The high spending in Baidu’s R&D department could be linked to the company’s investment in AI (artificial intelligence) innovations. In search of more growth and revenue diversification, Baidu is betting on AI innovations including in areas such as autonomous driving.
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Baidu eyeing autonomous driving market
Alphabet’s (GOOGL) Google, Tesla (TSLA), Uber, and Apple (AAPL) are some of the technology companies looking for new revenue opportunities in the autonomous driving market. According to Boston Consulting Group, the global market for autonomous vehicles will be worth $77 billion by 2035.
Baidu is working with strategic partners to develop an open platform for autonomous vehicles. Like Google, Baidu doesn’t aim to build self-driving vehicles. It instead hopes to make money from offering autonomous driving support.
Expanding into the autonomous driving arena is important for Baidu because the company also wants to diversify its revenue streams. Like Facebook and Google, Baidu depends on online advertising as its primary source of revenue.
R&D spending surges on AI push
As Baidu continues with AI push in pursuit of revenue opportunities in markets such as artificial intelligence, its R&D spending is growing. In 2Q17, Baidu’s R&D budget was more than 3.1 billion yuan (or $464 million) as shown in the chart, implying an increase of 27.7% year-over-year. Staff hiring drove the R&D spending in the latest quarter.