$23 billion up for grabs in smart speaker market
The smart speaker market provides another outlet for Baidu (BIDU) to diversify its business outside of advertising, which currently accounts for the vast majority of its revenue. According to estimates from Allied Market Research, the global smart speaker market was worth $4.4 billion in 2017 and will expand to $23.3 billion by 2025. For Baidu, the smart speaker market presents an attractive non-advertising revenue opportunity. Facebook (FB), another mostly ad-funded company, is also vying for the revenue opportunity in the smart speaker market. Facebook launched a display-enabled smart speaker called Portal last year.
Baidu boasts a 5.7% global market share
Baidu maintained its ranking as the world’s fourth-largest smart speaker company in the fourth quarter despite escalating competition in the market. Baidu shipped 2.2 million smart speaker devices in the fourth quarter, exiting the quarter with 5.7% of the global smart speaker market, according to data from Strategy Analytics. Amazon (AMZN) and Google (GOOGL), the market leaders, closed the fourth quarter holding 35.5% and 30% of the global smart speaker market, respectively. Alibaba (BABA) exited the fourth quarter holding 7.3% of the global smart speaker market, ranking third just above Baidu.
Reaping benefits of research work
For Baidu, going into the smart speaker business is not only a way to diversify its business, but also a way to reap the benefits of its heavy investments in research. Baidu spends about 15% of the revenue it generates on research and development with a special focus on artificial intelligence. Out of its research work, Baidu has built an autonomous driving platform called Apollo and a digital assistant called DuerOS, which is the brain behind its line of smart speakers.