Getting it right isn't difficult; even a stopped clock is right twice a day. But the true challenge lies in breaking free from past successes and adapting to the times for self-transformation. Recently, Baidu has embarked on a journey of radical transformation.

With the introduction of DeepSeek, Baidu seems to be embracing change with an open mind, successively announcing that ERNIE Bot will be entirely free and launching advanced search functionalities. Baidu's search, maps, DuerOS, and other services have all integrated DeepSeek.

Such a "reversal of fortune" requires both determination and courage.

However, alongside this comprehensive transformation, Baidu's 2024 financial report, released on February 18th, conveyed mixed signals.

In fact, for Baidu, which is currently in a period of transition, self-innovation brings potential opportunities but also difficulties and challenges.

Baidu in Transition

Key data from this financial report indicate that Baidu in 2024 was still in a prolonged period of transition and on the brink of significant change.

On February 18th, after announcing its fourth-quarter and full-year 2024 financial results, Robin Li responded to various questions at the earnings call, stating that 2024 was a crucial year for Baidu's shift from being internet-centric to AI-led.

However, in this pivotal year, Baidu's overall revenue performance was not robust: In 2024, Baidu's revenue was 133.1 billion, a year-on-year decrease of 1%.

In the fourth quarter of 2024, Baidu's revenue was 34.1 billion, a year-on-year decrease of 2%, marking multiple consecutive quarters of decline.

Despite the stagnant revenue growth, Baidu's profitability in 2024 was relatively optimistic: Its net profit was 23.8 billion, a year-on-year increase of 17%, surpassing market expectations. However, compared to the significant 168% increase in 2023, Baidu's profit efficiency has also begun to slow down.

Behind the lackluster revenue and substantial profit increase lies cost control. Baidu's marketing division has continuously optimized its workforce over the past year. Since the financial executive took charge of MEG, there has been a strong emphasis on 'cost reduction and efficiency enhancement.'

Simultaneously, Baidu's transition is also evident in its core business.

Historically, Baidu's online marketing revenue has been its traditional strength and primary revenue source, accounting for over 90% of total revenue in earlier years. As Baidu's business lines diversified in recent years, this proportion declined but remained high at around 75% over the past five years.

In 2024, online marketing revenue, encompassing products like Baidu's new search, Baidu Wenku, Baidu E-commerce, and Wenxiaoyan, accounted for nearly 70% of Baidu's total revenue, reaching 73 billion, but it decreased by 3% year-on-year.

It's noteworthy that despite Baidu's full embrace of AI, its heavy reliance on advertising undeniably faces multiple pressures on its current advertising business.

Whether it's the uncertainty of the macroeconomic environment, intensified industry competition, the challenges posed by AI-driven innovations in the search business, or the reshaping of game rules by native AI searches, Baidu's core business continues to be impacted.

Data shows that in the fourth quarter of 2024, Baidu's online marketing revenue was 17.9 billion, a year-on-year decrease of 7%, marking three consecutive quarters of year-on-year decline.

Additionally, iQIYI, a significant part of Baidu's revenue, limited by the lack of hit content and intensified industry competition, saw its revenue decrease by 14% year-on-year to 6.6 billion in the fourth quarter of 2024. Its full-year revenue and profit performance also declined.

Baidu's sales cost in 2024 was 66.1 billion, an increase of 2% year-on-year. To control costs amidst slight sales growth, efforts were directed towards cutting R&D. In the fourth quarter of 2024, Baidu's R&D expenses decreased by 12% year-on-year, and its full-year R&D expenses were 22.1 billion, a year-on-year decrease of 9%.

Fortunately, Baidu's current cash flow is relatively abundant. At the end of 2024, cash, cash equivalents, restricted funds, and short-term investments amounted to 139.1 billion, providing ample room for Baidu's subsequent strategic adjustments.

On the Brink of Radical Change?

Notably, among Baidu's three major revenue segments in 2024, the most outstanding performance came from non-online marketing revenue, led by Baidu's intelligent cloud business.

Data shows that in 2024, Baidu's non-online marketing revenue was 31.7 billion, a year-on-year increase of 12%. In the fourth quarter, this revenue was 9.8 billion, a year-on-year increase of 18%.

While Baidu's intelligent cloud business cannot yet fully support its revenue growth, encouraging changes are occurring simultaneously. For instance, in the fourth quarter of 2024, intelligent cloud business revenue increased by 26% year-on-year.

Moreover, notable performance in cloud intelligence, cloud driving, and other businesses has opened up more possibilities for Baidu's future.

On one hand, in 2024, Baidu's AI-related revenue from its intelligent cloud business increased nearly threefold year-on-year.

In the 2024 large model bidding projects, Baidu Intelligent Cloud ranked first in terms of the number of winning projects, industry coverage, and the number of winning projects for central and state-owned enterprises. Additionally, in the general large model vendor winning list released in January this year, Baidu ranked first in both the number of winning projects and the total winning amount.

On the other hand, Baidu's progress in the field of AI has also been quite effective. For example, in December 2024, the daily average call volume of the ERNIE Bot large model reached 1.65 billion, and the AI MAU of Baidu Wenku reached 94 million, a year-on-year increase of 216%.

In the highly anticipated field of autonomous driving, as a pioneer, Baidu has made significant progress through early layout and technological first-mover advantages. As of January 2025, Baidu's autonomous ride-hailing service has provided over 9 million rides nationwide. In the fourth quarter of 2024, Robotaxi provided over 1.1 million autonomous driving orders, a year-on-year increase of 36%.

In this regard, Robin Li stated that 2025 will be a crucial year for the expansion of Robotaxi.

However, compared to these data growths, the internal driver of Baidu's "radical change" may lie in its relatively firm strategic choices and demonstrated determination.

In 2023, Baidu quickly launched the ERNIE Bot large model.

But now, with the emergence of DeepSeek, the tide of challenges continues to rise. The list of Baidu's competitors is growing longer.

Therefore, achieving self-innovation is a more severe test of Baidu's managerial wisdom.

Recently, as Baidu announced that ERNIE Bot would be completely free, allowing all PC and APP users to experience the latest ERNIE series models, coupled with the launch of advanced search functionalities for ERNIE Bot and the integration of DeepSeek into Baidu's search, maps, ERNIE Bot, DuerOS, and other services.

Facing industry shocks, Baidu, led by Robin Li, has also begun to have new perspectives on open-source and closed-source models.

Even more, Baidu is undergoing a bold transformation that borders on 'self-contradiction', overturning Robin Li's inherent views on open-source models and officially embarking on a self-transformation journey.

There are only winners and losers, no excuses.

However, facing the future, challenges will be another keyword for Baidu, alongside opportunities.

Although Baidu's current strategic shift and technological layout have begun to show results, its heavy reliance on advertising in terms of revenue structure is difficult to alleviate completely in the short term.

Moreover, to fully embrace AI, Baidu is bound to continue investing on a larger scale. If Baidu's traditional search advertising continues to be impacted and squeezed by short videos and competitor AI searches, then during its transition period, Baidu may fall into a foreseeable passivity.

Additionally, with the relatively weak monthly active user growth of Baidu's core products, the hidden dangers exposed by Baidu's traffic side over the years may also pose another significant challenge for its search core business.

For example, as Tencent begins to integrate DeepSeek and continuously expands more application scenarios, WeChat, a super app with over 1 billion users, may pose the most direct threat to Baidu's search business fundamentals once its AI search function matures.

In fact, over the past few years, Baidu's search market share has been continuously shrinking: Data shows that in the domestic market, Baidu's market share has gradually decreased from 86.82% in 2021 to 60% in 2024.

From this perspective, the recent impacts on Baidu and its various actions surrounding DeepSeek are not just adjustments to its own strategy but also changes necessitated by circumstances. Perhaps they are also Baidu's intensive reflections on its past strategies.

Previously, facing questions, Robin Li of Baidu talked about DeepSeek, saying, 'Innovation cannot be planned. You don't know when and where innovation will come, what you can do is create an environment conducive to innovation.'

Now, after key transformations such as free use, open source, and full integration of DeepSeek, the deeper test left for Baidu's management may be how to maintain patience.

From this perspective, Baidu's AI gamble in 2025 is a game with only winners and losers, no excuses.