Tencent – Tale of two pies.

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Tencent dominates but still has much more to do. 

  • Tencent already dominates Digital Life in China and now it is increasingly turning its attention to the opportunity overseas.
  • This makes sense as China is starting to show signs of maturity meaning that the recent breakneck pace of growth will inevitably slow down forcing the BATmen to look overseas for more growth.
  • RFM has long identified that ecosystems and smartphone usage in China and developed markets are very different (see here).
  • This means that Chinese Digital Life services are not really relevant in developed markets and visa versa.
  • This means that overseas expansion for the BATmen has to be much more than just attempting to offer their Chinese services overseas.
  • While Alibaba is looking to grow overseas using AliPay (see here), Tencent is focused on adding relevant developed market assets to improve its coverage of Digital Life in developed markets.
  • This strategy has begun with the purchase of Supercell giving Tencent coverage of Gaming but it looks as if Tencent is keen on acquiring other segments of the Digital Life Pie also.
  • Most recently, Tencent appears to have made a move on Spotify that would have given Tencent a very strong position in Media Consumption.
  • Combined with Gaming, this would have given Tencent 40% coverage of the Digital Life pie in developed markets along with the 77% that it already has at home.
  • Spotify appears to have spurned Tencent’s advances, but I suspect that Tencent will continue to look for key strategic assets to improve its position in Digital Life in overseas markets.
  • Currently, Tencent has 30% coverage with Supercell but there is far more to creating a vibrant ecosystem than just gathering assets which provide coverage of Digital Life.
  • The trials and tribulations of Yahoo are all the evidence that one needs to conclude that one cannot succeed by coverage alone.
  • In 2014, Yahoo had 73% (more than anyone else at the time) of Digital Life covered but failed to create any meaningful traction on mobile devices.
  • This is because it was unable to take what were essentially fixed services and successfully leverage them into mobile.
  • Tencent does not have this problem as its traction in mobile is already strong but what it is missing is an understanding of the importance of integration.
  • I have long believed that to be really successful, the different services across Digital Life need to be integrated such that usage can be understood as a profile rather than a series of discrete and independent services.
  • This is one of the key ingredients of Google’s success and is something that Baidu and, increasingly Alibaba, are beginning to get to grips with.
  • Tencent on the hand, appears to be quite far behind in terms of grasping the importance of integration as I still see no signs of this happening.
  • In the short-term this is not a big problem but as Tencent’s valuation continues to rise, it will become an increasingly necessary for Tencent to bring its assets together in a cohesive way to justify its share price.
  • This is how Tencent can really begin to monetise its ecosystem beyond the sale of content and games and become a place where users spend their Digital Lives.
  • In China, some of this is coming through the rapid expansion of WeChat from a place to exchange messages to a place where all sorts of transactions can be executed.
  • However, in the long-term Tencent needs to have all of its services integrated and in that regard, there is quite some way to go.
  • I continue to like Tencent as it is the strongest of all the Chinese ecosystems and the share price still does not reflect all of the potential upside.
  • Hence, there is still not much very downside in Tencent if it fails to integrate its assets.
  • At the same time there is the promise of further improvement in the long-term if it begins to develop its ecosystem beyond a series of very successful but discrete services.
  • Tencent, along with Baidu and Microsoft remain my top picks.

Broadcast TV – Sword of Damocles pt. II.

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The sword has slipped its moorings.  

  • With all of the indicators now starting to turn against the TV broadcast industry even live sports no longer offers any real hope.
  • In 2013 (see here) the shoe was on the other foot where Netflix was trying to do deals with the cable companies to put its app on their set top boxes and be a part of their overall service.
  • What a difference 4 years makes, as Netflix no longer needs the cable companies to improve its reach and combined with Amazon Prime, YouTube, ESPN, NFL, Hulu and so on look set to render them obsolete.
  • The most recent indicators are deeply troubling:
    • First, the Emmy nominations: Netflix increased its nominations from 54 in 2016 to 91 in 2017 putting it in second place behind HBO (111 nominations).
    • Hulu and Amazon were way behind on 18 and 16 respectively but importantly these are orders of magnitude greater than last year.
    • Second, cord cutters: 2m adults in USA will have cut the cable this year up 33% YoY which combined with the younger generation that see no need to use cable brings the total to 56.6m users in the US market.
    • E-marketer forecasts that this will grow to 81.1m or close to 30% of the US population by 2021.
    • Only the over-55 segment is growing in terms of cable subscriptions with all other segments in decline.
    • Third, TV advertising: This has stalled at $71.7bn (e-marketer) after resisting this trend for several years and is expected to decline from next year.
  • These figures make grim reading but I suspect that there is worse to come.
  • These sorts of trends rarely occur in straight lines and the trend over the last 12 months has been one of acceleration which shows no sign of abating.
  • The one survivor is likely to live sports as this is the only media type that loses almost all its value when time shifted.
  • However, there is no reason why this cannot be broadcast over the Internet which is something that ESPN and the NFL have already cottoned on to.
  • Their apps are already No. 3 and No. 8 in terms of MaU on US smartphones for video streaming apps, further undermining what little appeal broadcast has left.
  • These statistics are turning against broadcast much more quickly than I thought they would back in 2013 and I see a real possibility that broadcast is no more in less than 10 years.
  • The broadcasters had an opportunity to deal with the OTT players.
  • Clearly, they should have taken it.

Facebook vs. Snap Inc. – Own goal

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Some of Snap’s woes look self-inflicted.

  • Snap appears to be losing key influencers to Facebook not because of a copied service from Facebook, but because Snap is not making it very easy for them to make money.
  • Influencers are social media personalities with large numbers of followers that are paid by companies to feature their products in their videos.
  • Influencers are incredibly important for marketing to millennials and generation Z meaning that this is something that Snap needs to be all over in order to keep advertisers using its platform.
  • Unfortunately, data from Captiv8, the audience tracking service, indicates that influencers are leaving Snap and are finding their way to Instagram.
  • During Q2 17, Snap saw a 20% decline in influencers while Instagram saw an 11% jump.
  • Influencers are not leaving Snap because there is something better on Instagram but because Facebook and Instagram make it much easier for them to make money.
  • Being an influencer is surprisingly hard work and many influencers are struggling to make a good return on their time and investment on Snapchat because Snap does not provide any real support for influencers.
  • In many ways influencers are a bit like developers which in order to get going need lots of love and support.
  • Facebook and Instagram have understood this and acted upon it while Snap’s management does not seem to care that much.
  • Snap seems to be more focused on user to user engagement but this is much harder to monetise.
  • The financial results of this stance are clear with the first two sets of results from Snap being a huge disappointment while Facebook is having one of its best years ever.
  • Snap badly needs to address this situation as influencers are key for marketing to its key user base but while management favours funky animations and camera-enabled spectacles, I can’t see the financials improving.
  • Consequently, I think that Q3 17 and Q4 17 will continue to see the user numbers and the engagement disappoint leading to more pressure on the share price.
  • I continue to think that while Twitter is also stagnating, it is in a much better strategic position as it remains unopposed in its space.
  • Snap by contrast is under colossal pressure from Facebook which I think could lead to the shares dipping well below my fair value of $12.40 a share.
  • If they were to hit $10 or below, I could see acquirors coming out of the woodwork.
  • until then there is only pain to had with Snap.

Apple – SiriKit?

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There are very good reasons to launch SiriKit.

  • Apple has made some changes to executive responsibility for Siri that I see as a sign that things are not going very well and that changes are required.
  • Given Siri’s weakness, I don’t see much downside for Apple in allowing third parties to implement the digital assistant in their hardware presumably using an SDK called SiriKit.
  • Responsibility for Siri has moved from services (Eddy Cue) to software (Craig Federighi) which I think is pointing to much deeper integration of Siri into the Apple ecosystem.
  • The way this kind of development works is that the services are developed on top of the finished product of the software department.
  • With Siri as part of the software department it can be much more deeply integrated as the software is created and refined which should allow its functionality to be meaningfully enhanced.
  • However, what is unlikely to change is that fact that Siri is just not that smart and is easily outperformed by Google Assistant and even Amazon Alexa on occasion.
  • This is due to the fact that Siri has not been in existence for very long and that its global learning capability is hobbled by Apple’s implementation of differential privacy (see here).
  • The net result is that I think Siri is falling behind in the AI race and moving Siri to software will not really solve the problem.
  • To really improve, Siri needs to be used and this is where I think the problems really begin.
  • Usage of Digital Assistants primarily occurs when users’ hands are busy which currently means in the car and in the kitchen.
  • Apple’s position in both of these areas is quite weak and a $500 Home Pod that is nearly 4x more expensive than Google Home and 10x more expensive than the cheapest Amazon Alexa device is unlikely to help penetration.
  • Apple’s strategy to date has been to drive differentiation and desire through software that can then be monetised by selling hardware at premium prices.
  • This is why it keeps all of its software to itself but I think Siri can be an exception:
    • First: I do not think that Siri is differentiating for Apple because it is a substandard service.
    • Consequently, if it was removed from Apple products or allowed to appear on the products of third parties, I don’t think it would affect Apple’s ability to price its hardware at a premium.
    • Second: Siri is driven by AI and the AI community is far more open and collaborative than Apple has been historically.
    • For example, DeepMind published its method for creating AlphaGo which in my opinion was then immediately copied by Tencent to create its own AI Go player.
    • Apple has opened up a little bit and has begun sharing and publishing some of its methodologies for Siri (see here) which I suspect will increase over time.
  • As a result, I see only upside for Apple in making Siri available for third parties to put on their devices.
  • I think that Siri on third party hardware is very unlikely to damage Apple’s hardware business and at the same time could result in many more devices in the places where digital assistants are most used.
  • The net result would also be more data collection and learning that would help make Siri better.
  • This would represent a big departure from the way Apple has been doing businesses and there is a possibility that Apple has become too big and too set in its ways (like Nokia was) to make a departure of this magnitude.
  • Consequently, I think the probability of Apple launching SiriKit is pretty remote which is will to allow Google and Amazon to continue dividing the market between them.
  • My top picks remain Tencent, Microsoft and Baidu.

Google vs. HERE – Perfect parking

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HERE has more potential but needs to execute.

  • Google is upping the ante in the race to provide value-added services on top of digital maps, but with the right execution, HERE should be able to provide a much better service.
  • In January Google launched its parking difficulty icon on Android Maps which give the user an idea of how difficult it will be to park at the user’s destination.
  • This was initially launched in 25 US cities but this has been: 1) extended to another 25 locations (Canada, Europe and Brazil), and 2) expanded to offer parking suggestions in the area.
  • This service is based on historical parking data as well as data gathered from smartphones using Google services within a certain location to ascertain how busy that location is.
  • This is similar to the popular times and visit duration data that Google provides for businesses and will give the user an idea of how long he should expect to spend looking for a place to park.
  • While this will be a useful addition to Google Maps, I think that HERE should be able to offer a service that is vastly superior.
  • This is for two reasons:
    • First, data quality: While Google’s service is based on estimates and AI, HERE’s service should be based on much more specific data.
    • This is because HERE has access to automotive sensor data while Google does not.
    • For example, when HERE’s location platform detects an ignition start, it can be almost certain that the space occupied by that vehicle is about to be vacated.
    • It will also know from ignition switch-off which spaces are occupied and which are not.
    • This gives it a highly accurate, real time picture of the parking environment meaning that it’s HERE ON-Street Parking service should be much more accurate than Google.
    • Second, positioning. Vehicle positioning is often much more accurate than that offered by mobile phones as the antennas are larger and are almost always open to the sky.
    • This means that HERE should have a more accurate real-time picture of exactly where the devices connected to its platform are.
    • Combining this with the highly granular data it gets directly from the vehicle, should allow HERE to provide its users with a more accurate and relevant parking service than Google Maps.
  • This is exactly the kind of differentiation that HERE needs to win the attention of users but there are caveats.
  • Google is present on almost every smartphone in the market (except China) meaning that although its data set is much less accurate, it has a much fuller picture of the environment.
  • HERE by comparison is at a very early stage in getting devices connected to its location platform meaning that its lacks the visibility of the environment to make its service work really well.
  • This allows Google to offer a workable service today, while HERE is still at the stage of building out its network of data collecting devices.
  • Furthermore, should Google manage to get access to the sensor data generated by vehicles (Android Auto offers no access), then HERE’s key advantage will be lost.
  • However, most automakers have recognised that Google represents a meaningful long-term threat and are keen to keep their sensor data to themselves.
  • Google has done a deal with Volvo and Audi but whether it has managed to gain access to sensor data is still unclear.
  • The net result is that HERE has an opportunity to roll-out a much better service and win over users, but it needs to quickly achieve scale or risk being swamped by Google should it gain access to sensor data.

Samsung Bixby– Lightweight

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Bixby is hopelessly outclassed.

  • Bixby voice only shines in the areas where Samsung has given it special access to hardware that competitors do not have.
  • Outside of this area, Bixby is a third-rate experience that is unlikely to generate much traction especially as the vastly superior Google Assistant is just a button press away.
  • The voice piece of the Bixby digital assistant has finally launched but despite months of feverish activity in trying to teach Bixby to speak English, it is still not very good at it.
  • Bixby has been granted exclusive hardware access such that it can work when the screen is off or the device is locked.
  • This is something that Google Assistant cannot do but it also comes with the reality that Bixby is always listening.
  • I think that this will make some users very uncomfortable as a microphone in one’s pocket is far more intrusive than a microphone listening in the kitchen.
  • Voice recognition works best when there is an element of training involved as users often say things in very different ways.
  • Unfortunately, it appears that for some users, Bixby is unable to recognise the training sentences implying that this part of the system still needs work.
  • In effect Samsung has programmed Bixby with a series of standard functions that can be used to operate the smartphone as well as basic functions in the apps.
  • Outside of that area, the user is pretty much out of luck.
  • Unfortunately, these only really work for Samsung apps which outside of the messaging app for SMS, I think no one really uses.
  • Furthermore, for navigation and search, Bixby uses Google but without some of the bells and whistles that make Google so good.
  • For these functions, it makes no sense to use Bixby when one can go straight to Google.
  • Bixby does support third party apps through the “Bixby Labs” program but unfortunately it doesn’t seem to work properly.
  • Bixby can open things like Google Maps, YouTube and so on but does not seem to be able to get past the main screen of those apps.
  • The problem with Bixby is simply that its creator, Samsung, has no artificial intelligence expertise to speak of and digital assistants are only about AI.
  • Google Assistant is the best not because Google knows how to make an assistant but because the AI that runs it is the best in the world.
  • This contrast is so stark, that Samsung has had to resort to hobbling Google Assistant in certain areas (hot word) just to give Bixby a chance.
  • I think that this will encourage users to try Bixby once or twice but when they realise how poor it is, they will go back to Google Assistant.
  • Google will not be losing any sleep over Bixby even though it could end up on a very high percentage of Google ecosystem devices.
  • Samsung is now the No. 1 semiconductor manufacturer in the world, but I still rank it almost dead last when it comes to AI.
  • I think its investments in this space would be better accruing to shareholders in the form of higher profits rather than being invested in functions that are likely to damage Samsung’s reputation rather than improve it.
  • Samsung’s recent rally has removed the valuation argument for Samsung which leaves me preferring Tencent, Baidu and Microsoft.

GrubHub – Big appetite

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Eats24 is an essential acquisition.

  • GrubHub is making exactly the right moves to give it the best chance to beat its larger and much better financed rivals in the brutal food delivery business.
  • Alongside results that broadly met expectations, GrubHub announced the acquisition of Eat24 for $288m well over double what Yelp paid for it in February 2015.
  • This may seem to a huge premium but when one looks at what Eat24 can bring to GrubHub, it is not difficult to make the case that this could be the most important move GrubHub has made in its history.
  • GrubHub is an online marketplace where diners come to order amd have delivered food from participating restaurants.
  • As an online marketplace (network business) it is subject to exactly the same dynamics as ride hailing, classifieds and so on.
  • 20 months ago I proposed a rule of thumb that states: A company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit (see here).
  • In effect, by hitting one of these two criteria the marketplace becomes to the go-to place to transact meaning that buyers become somewhat less price sensitive and sellers will pay more to sell their goods there.
  • It is this that allows the marketplace to make proper money but before this level is reached all players will almost certainly be under excruciating pressure.
  • GrubHub is no different in that since the advent of UberEats and Amazon’s entrance into this space, there has been relentless pressure on margins.
  • In the last 12 months EBIT margins have fallen to 13.9% in Q2 17A from 18.7% in Q2 2016 despite a 32% increase in revenues.
  • GrubHub is the market leader with 34% but Uber is not that far behind with 20%, Eats24 with 16% and Amazon on 11% (Cowen &Co).
  • Regulatory scrutiny has been high on GrubHub’s previous acquisitions but the fact that this deal is likely to be passed with barely a ripple is an indication of how much more competitive the market is now considered to be.
  • There is some overlap between GrubHub and Eats 24 but importantly once combined the platform will have 75,000 unique restaurants on its books and 48% market share of transactions.
  • Assuming that the acquisition and integration proceeds flawlessly, then GrubHub will be more than double the size of its nearest rival (Uber) and able to at least stabilise its margins.
  • Furthermore, as long as it can hold onto this advantage, it should be able to withstand the pressure from its rivals despite the fact that they have very big brothers backing them up.
  • Consequently, I think that GrubHub had to make this acquisition otherwise it faced being ground down by its better financed rivals until it was forced to sell itself to one of them.
  • GrubHub has made the right strategic move to ensure its longevity but now it comes down to execution to determine its future.

Spotify – Free foundation

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Apple Music still making no dent.

  • Spotify has crossed 60m paid users and while its absolute level of growth is slowing due to the law of large numbers, it is still adding paying subscribers at the very healthy rate of 2m per month.
  • In September 2016 Spotify hit 40m, passed 50m in March 2017 and hit 60m at the end of July 2017.
  • For the last 18 months, Spotify has been steadily adding subscribers at around 2m per month which is showing no signs of slowing down.
  • This has held steady for the last 5 months indicating that Apple Music is having very little impact on Spotify despite the substantial advantage Apple has in owning the App Store and having complete control over the iPhone.
  • I continue to believe that this is for two reasons
    • First:  Spotify remains fundamentally a better service.
    • This is driven by the fact that the music is now incidental in that anyone can create a service with 40m tracks and a search box.
    • Where Spotify is different is that it uses the data that it collects from all of its users in order to make its service better.
    • Apple also does this but Spotify’s AI in music continues to meaningfully outperform Apple’s.
    • By understanding the characteristics of the music offered by its service and the preferences of its listeners, it can accurately match the two together.
    • This also allows it to come up with innovative services that keeps its service fresh and one step ahead of the competition.
    • Second: Spotify has a large and engaged free tier of users that serve as the funnel for conversion into paid users.
    • Free users get to spend time with the service without paying for it, making it much easier to make these users understand why the service is better than anything else available.
    • This meaningfully offsets the disadvantage that Spotify has compared to Apple when it comes to marketing.
    • These free users generate data which Spotify can use to train its algorithms which can in turn be used to make the service better.
    • Apple also has a lot of data but has not been nearly as good at turning raw data into actionable intelligence with which it can improve its service.
  • The net result is that Spotify’s position is strengthening with every new user that it adds and between them, Apple and Spotify account for almost all of the growth in the recorded music industry.
  • Consequently, I remain unconcerned that Apple will be able to put real pressure on Spotify and think that its path to better profitability remains clear as the labels increasingly need Spotify more than Spotify needs the labels.
  • This position is becoming clearer as Spotify was able to strike a better deal with Universal (see here) and the outlook is that the rest of the industry will be signed on similar terms.
  • I still think that the key issue for Spotify going forward is to maintain momentum of growth of its free users.
  • It is the free user pool that has been the foundation of its outperformance of Apple, meaning that the free tier will be critical to keep the paid tier (where the real money will be made) increasing at this very healthy rate.
  • I continue to think that there is enough space in this market for 2 big players and with those spots filled, it is the fortunes of Pandora, Tidal, Deezer and so on that trouble me now.

Indian e-commerce – Road to ruin.

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The only likely winner in India is now Amazon.

  • Snapdeal has ended merger discussions with Flipkart in a move that, I think, snuffs out the one chance the local players had to keep Amazon at bay.
  • At the same time Softbank is now looking at committing $1.5bn – $2bn into Flipkart in a move that I think will solve nothing because in a network economy, two halves do not make a whole.
  • I think Softbank should not put any more money into Indian e-commerce as the most likely winner in this market is now Amazon in which Softbank has no stake.
  • Snapdeal’s strategy is now to become a niche player and is cutting costs and selling assets in order to raise the capital required to reach profitability in its niche.
  • In my opinion, this strategy demonstrates a fundamental misunderstanding of how Amazon works and what it is likely to do to win the Indian market.
  • Most companies have a strategy that involves trade-offs such as offering high quality or low prices.
  • This is the route that Snapdeal is taking by deciding to streamline and focus on by giving sellers the best experience in India.
  • This is not how Amazon functions as there is no either / or in its vocabulary.
  • Instead Amazon goes for dominance and offers high quality and low prices or in this case the best experience for both sellers and buyers
  • How Flipkart will alter its strategy following the failure of the merger remains to be seen, but without the scale that Snapdeal would have given it, its chances of seeing off Amazon are greatly reduced.
  • Flipkart, Snapdeal and Amazon are network businesses just like Uber, Alibaba, AirBnB, Craigslist and so on and consequently, they are bound by the same rules.
  • 20 months ago I proposed a rule of thumb that states: A company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit (see here).
  • This, in a nutshell, is the problem faced by both Flipkart and Snapdeal in India.
  • Flipkart is bigger than Snapdeal and so it is in a slightly better position, but it is not double the size of its nearest rival.
  • Furthermore, both will now have to contend with Amazon which is absolutely determined not to make the same mess of India that it made in China when it went up against Alibaba and lost.
  • I estimate that Amazon pumped $400m of losses into the Indian market in Q1 17A and roughly the same amount again in Q2 17A and I don’t think it will be afraid to up the ante from here if needed.
  • Amazon is not the largest in India but it can lose far more money for far longer than either of the other two.
  • Flipkart has around 35% of monthly active users but it will need to reach at least 50% before it is double the size of Amazon (7Park Data).
  • This is why a Snapdeal merger made sense, because adding Snapdeal’s users to its own would have got it pretty close to achieving that milestone.
  • Consequently, Amazon will now be able to grind its two main rivals down to the point at which they either exit the market or agree to be acquired.
  • Both of these scenarios are likely to result in much lower valuations than were being discussed as part of the deal.
  • Hence, I think that Amazon is the only real winner from the failure of this merger which I think raises existential questions for local providers of e-commerce marketplaces in India.
  • In the short-term this is unlikely to help Amazon’s fundamentals much and so I remain unenthused with an investment in its shares.
  • I continue to prefer Tencent, Baidu and Microsoft.

 

Amazon & Baidu Q2 17A – Back to basics

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Amazon and Baidu get back to what they do best.

Amazon – Not making money

  • Amazon reported disappointing results and guided weakly as it once again spent everything it could on investing in future revenue growth.
  • Q2 17A revenues / EBIT were $38.0bn / $628m compared to consensus at $37.2bn / $1.0bn.
  • AWS put in another mighty performance with revenues of $4.1bn and margins of 22% but this was gobbled up by the international operation where margins have fallen to -6.3% from -1.4% in Q2 16A.
  • I am pretty sure that is mostly driven by Amazon’s absolute determination not to lose India to Flipkart / Snapdeal the way it lost China to Alibaba.
  • The good news is that Flipkart and Snapdeal are squabbling over their merger and the longer it takes them to get it done, the less chance they have to keep Amazon out of their home market. (see here).
  • This heavy investment looks set to continue with Q3 17E guidance disappointing once again.
  • Q3 17E revenues / EBIT are expected to be $39.25bn – $41.75bn ($40.5bn) / LOSS $400m – $300m (LOSS $50m) compared to consensus at $39.9bn / $1.1bn.
  • There is no sign of this “bumbling around break-even” in sight and consequently the valuation of Amazon looks more stretched than ever.
  • I prefer not to pay now for profitability that very fleetingly materialises.

Baidu – Performing in line with China.

  • Baidu reported good Q2 17A revenues as the regulatory impact on its revenues has past and the company kept a tight lid on expenses.
  • Q2 17A revenues / net income were RMB20.7bn / RMB4.4bn compared to consensus at RMB20.7bn / RMB3.3bn.
  • A large part of this improvement has come from cutting back on investments in its food delivery business but also from a big fall in traffic acquisition cost which fell from 15.9% of sales in Q2 16A to 11.9% in Q2 17A.
  • Despite the cuts, investments in AI and content remain intact and are the two main thrusts for revenue growth beyond search.
  • In AI, I rank Baidu highly, although it is very focused on China, and think that this is its biggest strategic advantage to remain a big player in Chinese Internet.
  • Baidu should be able to make its services more intuitive and useful compared to those of its competitors which should help its services win and keep more users.
  • The outlook for Baidu remains steady, now that the regulatory problem is in the rear-view mirror, and I see an upwards correction as it catches up with its peers.
  • I continue to like Baidu alongside Microsoft and Tencent.