Baidu taps rich O2O seam for growth

Search major sees online-to-offline expansion as the way ahead

Online search firm Baidu Inc is widening its horizons beyond the search business to other global activities, a top official said.

Zhang Yaqin, president of Baidu said on Wednesday that the online-to-offline businesses linking users with brick-and-mortar services will be the new growth engine for Baidu, as it redrafts its long-term growth options.

"In the past, our focus has been on searching the right information for users anywhere. In the future, we want to interconnect the real world and connect people to services,"

Zhang said despite its robust core search business, Baidu has been betting big on the O2O sector. The company has spent billions of dollars to buy startups ranging from group-buying site Nuomi, online travel agency Qunar to on-demand laundry service edaixi and boutique e-commerce mia.com.

Describing the journey as a "very exciting" one, Zhang said Baidu aims to create a platform catering to all dimensions of location-based lifestyle, where consumers can buy movie tickets, order food deliveries and book rides as well as flight tickets.

"The O2O market is much bigger than the online search market," said Zhang, adding that despite the cash-burning competition to snatch customers, the edge in technology will help Baidu have the "last laugh".

The O2O sector has everything to do with algorithms and mathematics, which is key for businesses to be sustainable and profitable, he said. "It just takes some time and patience."

Baidu reported a 36 percent year-on-year fall in third-quarter operating profit despite a surge in revenue, due to the rapid growth of its O2O business. Its American depository receipts have fallen 12.7 percent since the beginning of this year.

Zhang said the huge opportunity in China's O2O market may not be well understood in the US, as the two countries are different. "In China, because of its demographics, cost structure, and population density, you can leverage a lot of things, and the infrastructure and technology will help us."

"That's a huge opportunity in China, and that is the profit in the future," he said.

Wu Zhaowen, an analyst with US-based consultancy Strategy Analytics said: "To maintain its competitiveness, it is important for Baidu to incorporate the search function with differentiated services. Mobile map services are a good option as consumers often start from location based search when looking for products or services. That said, Baidu also needs to further expand its mobile payment offerings.