"Cityscape" has learned that Baidu Intelligent Cloud Business Group (ACG) has recently completed a new round of organizational restructuring:

Baidu Netdisk's C-end business has been reassigned to the Mobile Ecosystem Group (MEG) and will be managed by Wang Ying, Baidu's Vice President and Head of the Wenku Business Department, while the toB business will continue to operate within ACG.

The Application Product Departments 1 and 2 within ACG have merged. Yu Youping, the former Vice President of Baidu Intelligent Cloud and Head of Application Product Department 1, left the company in August. The merged department is now led by Ruan Yu, Baidu's Vice President and former General Manager of Baidu Netdisk, while Liu Bin, the former Head of Application Product Department 2, will now report to Ruan Yu.

The restructuring is still ongoing, and the internal ERP architecture has been largely updated, but further changes may still occur.

As of press time, Baidu has not responded to the above news.

01 Netdisk Returns to MEG

After this adjustment, Baidu Netdisk's C-end business has returned to MEG for the second time in two years.

On May 5, 2022, Robin Li, Baidu's Chairman and CEO, announced through an internal letter that Shen Dou, Executive Vice President, would take over as the head of Baidu Intelligent Cloud Business Group. With Shen Dou's rotation, Baidu Netdisk and TGE businesses were also adjusted to ACG accordingly.

According to Photon Planet, Ruan Yu, the former General Manager of Baidu Netdisk, also transferred to ACG along with Shen Dou, becoming the only VP he took with him during his rotation.

Industry insiders told "Cityscape" that the adjustment was aimed at bridging the gap between personal cloud and enterprise cloud services. "From a business group perspective, Baidu Netdisk belongs to Baidu MEG, while Intelligent Cloud belongs to ACG, catering to C-end and B-end users respectively, which prevents them from achieving the same level of synergy as Alibaba Cloud and Aliyun," they explained.

Now, the Netdisk business has been readjusted back to its starting point. "Netdisk was never suitable for ACG, as the combination failed to achieve a 1+1>2 effect," said an informed source close to Baidu to "Cityscape."

Commenting on the change, a Baidu employee remarked, "Netdisk is a valuable asset within ACG with strong self-sustainability. It's a hot commodity that everyone wants, no matter where it goes."

As early as 2020, rumors emerged that Baidu was considering spinning off multiple businesses, with Baidu Netdisk potentially going public on the STAR Market with a valuation of up to 30-40 billion yuan. Although these rumors ultimately proved unfounded, they highlighted the potential of Baidu Netdisk.

In 2023, with the accelerated application of AI large models, a new transformation was underway in the C-end application ecosystem. On October 17 of the same year, at the Baidu World Conference held in Beijing, Robin Li announced that products such as Baidu Netdisk and Baidu Wenku had completed AI reconstruction.

According to the introduction, Baidu Netdisk's personal cloud smart assistant "Yunyiduo" has transformed from graphical interface interaction to natural language interaction, enhancing multi-modal information understanding. It can accurately locate videos, summarize video content with one click, and extract golden sentences. Yunyiduo has already attracted 20 million users.

At present, the decision to reassign Netdisk to the head of the Wenku BU may bring about new changes.

"I always thought the Netdisk business was larger than Wenku, but I didn't expect Wenku to swallow up the entire Netdisk business," according to "Cityscape." This adjustment has sparked widespread discussions within Baidu, with many employees puzzled by the decision-making logic behind it.

This adjustment was not entirely unexpected. In February this year, Baidu MEG underwent a new round of organizational restructuring, and the Baidu Wenku Business Department was officially upgraded to a BU (Business Unit), with Wang Ying, Baidu's Vice President, continuing to serve as its head.

The upgrade of the Wenku business means that it will receive more resources and human support, but it will also need to meet higher revenue and user growth targets. This provides a rational basis for Baidu Wenku to absorb the Netdisk team.

In the June 2023 edition of the "AI Product Rankings," Baidu Wenku topped the domestic overall rankings for the third consecutive month, thanks to its AI capabilities. Data shows that the number of AI users on Baidu Wenku has surpassed 140 million, with over 1.5 billion uses of AI functions.

As reported earlier by 36Kr, after being upgraded to a BU, Baidu Wenku's positioning gradually became clearer, aiming to become a productivity tool comparable to Microsoft's Office Copilot. The integration of "Wenku + Netdisk" seems to further validate this strategic speculation.

At this stage, the Netdisk market has essentially evolved into a duel between Baidu Netdisk and Aliyun Disk. With the business adjustment of Baidu Netdisk, some new market moves may emerge in the future.

02 Personnel Changes in ACG

According to "Cityscape," Yu Youping, Vice President of Baidu Intelligent Cloud and Head of Intelligent Cloud Application Product Department 1, left the company in August this year.

Public records show that Yu Youping holds a Ph.D. from Huazhong University of Science and Technology and an EMBA from Peking University Guanghua School of Management, with years of experience in product development and management at leading technology companies.

Yu Youping worked at Baidu for 17 years, joining the company's Commercial Product Marketing Department in 2007. He was responsible for designing multiple commercial products for search promotion and served as the primary leader of Baidu Statistics. Throughout his career at Baidu, he steadily advanced, holding positions such as Deputy Director of the Big Data Department and General Manager of the AI Technology Ecosystem Department.

From 2024, Yu Youping took full responsibility for Baidu Intelligent Cloud Application Product Department 1, leading the research, development, and operation of large model application products.

"Youping was in charge of seven product lines and was even called the 'SaaS God' by some internal employees. The product roadmap he promoted in Application Product Department 1 was very solid, and he was genuinely getting things done," said a Baidu employee about Yu Youping.

According to the Aiqicha platform, on August 30, Yu Youping ceased to be the legal representative of Baidu Intelligent Cloud (Guangzhou) Technology Co., Ltd., with Shi Qinghua, Baidu's Vice President, taking over the role.

Regarding this personnel change, "Cityscape" contacted Yu Youping, but as of press time, no response had been received.

After Yu Youping's departure, Baidu employees began discussing the successor to the head of ACG Application Product Department 1. Some employees believed that "this is an opportunity to cut unpromising businesses and reintegrate Department 1 and Department 2, with the latter's head Liu Bin potentially taking over."

In fact, rumors of a merger had already surfaced as early as June-July this year.

Now, these rumors are gradually becoming a reality, and the integration of ACG Application Departments 1 and 2 is an inevitable trend. However, there was a surprising element to this adjustment - Ruan Yu, the former head of Netdisk, was appointed to lead both Application Departments 1 and 2.

Public records show that Ruan Yu joined Baidu in September 2013 and demonstrated outstanding leadership skills in various key positions. During his tenure overseeing Baidu Baike, he innovatively launched "Miaodong Baike" and received Baidu's highest honor, the "Baidu Top Award." From September 2017, Ruan Yu served as General Manager of Baijiahao, and in June 2019, he was promoted to Chief Knowledge Officer of Baidu. In March 2020, he was appointed General Manager of Baidu Netdisk and then promoted to Vice President of Baidu in April 2021.

The "Baidu Top Award," established by Robin Li in July 2010, is the company's highest-level award. It is awarded based on three criteria: the project must be sufficiently important, the results must far exceed expectations, and the team must consist of no more than ten people, none of whom can be at the director level or above.

This promotion of Ruan Yu may indicate Baidu's recognition of his past achievements, particularly in the Netdisk business.

A Baidu employee speculated about the changes: "Isn't it because the Netdisk business is moving, and Ruan is staying in ACG, that the application department was reassigned to her management? Otherwise, she would only be in charge of Metaverse."

"Ruan Yu has always had a good reputation within ACG. She is already communicating with the ACG team one by one, and there should be clear results soon," said the informed source close to Baidu to "Cityscape."

03 Awaiting AI Deliverables

On August 22, Baidu released its financial results for the second quarter of 2024, reporting a net profit attributable to Baidu of 5.5 billion yuan, a year-on-year increase of 5%. Quarterly revenue was 33.931 billion yuan, slightly down from 34.056 billion yuan in the same period last year, marking the first year-on-year decline since the third quarter of 2022.

Baidu's largest source of revenue - online advertising - generated 19.2 billion yuan in revenue, down 2% year-on-year. During the second-quarter earnings call, Robin Li explained that the advertising business faced a series of external pressures.

At the same time, Baidu's active promotion of AI innovation in its search business has also created considerable internal pressure. Currently, 18% of Baidu's search results are provided by generative AI, which has yet to generate revenue.

In the quarter, non-advertising revenue, including Baidu Cloud and Intelligent Driving, was 7.5 billion yuan, up 10% year-on-year, an increase from 6% in the first quarter.

Robin Li revealed during the earnings call that Baidu Cloud generated 5.1 billion yuan in revenue in the quarter, up 14% year-on-year, higher than the 12% growth in the previous quarter. Of this, 9% came from external customers' demand for large models and generative AI-related services.

It is reported that Baidu's daily API calls have grown from around 200 million in mid-May to over 600 million currently, with daily token text processing reaching one trillion times.

During the Baidu earnings call, the company disclosed that Baidu Cloud is gradually phasing out low-margin businesses to create long-term operating profits and market share. "In the long run, the standard profit margin of generative AI clouds will be higher than that of traditional cloud businesses," it stated.

It is estimated that generative AI contributed approximately 459 million yuan to Baidu Cloud's revenue in the quarter, up from 324 million yuan and 274 million yuan in the previous two quarters, respectively. While this trend shows growth, the business's contribution to overall performance is still limited and insufficient to significantly impact Baidu Cloud's overall growth trajectory.

In the field of autonomous driving, as of July 28, Baidu's autonomous driving mobility service had provided over 7 million rides nationwide; approximately 899,000 rides were provided in the second quarter, a year-on-year increase of 26%. Analysts believe that large-scale commercialization of this business will take time.

Some market analysts believe that Baidu's current AI strategy has yet to significantly boost its core business.

On the day the earnings were released, Bloomberg noted that Baidu faces challenges in translating its leadership in generative AI into substantial revenue, highlighting this challenge with its underwhelming performance. While Baidu's Wenxin large language model contributes increasing additional revenue through advertising and cloud services, it is engaged in an AI price war with companies like Alibaba and Tencent. The Beijing-based company may take years to ease its dependence on advertising.

Recent trends in Baidu's share price also reflect market skepticism about its ability to deliver on AI, with share prices repeatedly retracting.

Perhaps against this backdrop, Baidu is once again adjusting its business structure. Whether it's the advertising business or the cloud business, the window for Baidu to deliver on its AI promises is gradually closing. The market's patience is not infinite.