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Baidu Acts to Regain Influence, Make AI Inroads -- WSJ

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01/19/2017 | 03:48am EDT
By Li Yuan 

Whether successful entrepreneurs make good managers is a topic of much debate. Steve Jobs stumbled in Apple Inc.'s early days, being ousted by the CEO he hired before making a comeback 12 years later. Google's founders, Sergey Brin and Larry Page, listened to their investors and brought in Eric Schmidt as CEO in 2001.

Robin Li, chief executive of Baidu Inc., is starting to address this issue 17 years after he co-founded what became China's dominant search engine and 12 years after its initial public offering on Nasdaq. Mr. Li said this week that he would hand day-to-day management to Qi Lu, a well-regarded former Microsoft Corp. executive hired as group president. Though he retains the chief-executive title, Mr. Li says the change frees him to focus on strategy and investments.

The decision was greeted with quiet relief in some executive offices at Baidu and by applause from industry insiders. "This is about the only positive news for Baidu in a long time," said Feng Dahui, founder of an online search startup, of Mr. Lu's appointment. It comes as Baidu has been slipping in market valuation and influence, and Mr. Li's effectiveness as a manager has been called into question by online users and his own executives.

Last year, the death of a young cancer patient, after he tried an alternative treatment advertised on a Baidu link, battered the company's image and prompted the government to overhaul online advertising regulations. A Baidu spokeswoman said at the time that the company regretted the man's death and was committed to providing "a safe and trustworthy search experience for our users." Baidu also scaled back on a money-burning foray into meal-delivery and group shopping.

For years, Baidu has squandered its once-towering position in the Chinese internet world. Baidu dominates search with what effectively became a state-gifted internet monopoly after China blocked Alphabet Inc.'s Google. Baidu rose to become one of China's biggest internet companies by market capitalization.

Now Baidu lags behind, having about a quarter of the market valuations of its two biggest competitors, e-commerce titan Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which dominates mobile messaging.

The reason? Baidu became too comfortable in its monopoly position. The company was slow to ride China's jump from desktop internet to mobile internet -- a move that started gathering momentum in 2010 when Google's search engine became completely blocked in China. In the third quarter of 2016, Baidu generated 80% of total search revenue in China, according to Analysys International.

Mr. Li, at a news conference Wednesday to announce the management change, defended his leadership, saying he isn't retiring and is confident that Baidu is destined for global influence. Baidu declined to answer questions for this column.

Baidu isn't out of ideas or big initiatives. Since last year, Mr. Li has been repositioning the company as a leader in artificial intelligence -- an area in which Baidu has advantages over its rivals in talent and technology, given AI's critical role in the search algorithm. Baidu is also making an aggressive push into the driverless-car and related technologies.

In the management change, all senior executives who used to report to Mr. Li now report to Mr. Lu, who oversaw Microsoft's Office business until resigning in September. Mr. Li still retains the chief-executive title, and it isn't clear if and when he would hand that to Mr. Lu.

Current and former Baidu executives point to Mr. Li's alternately aloof and controlling styles for some of the company's problems.

While Alibaba and Tencent caught the wave of the mobile internet, investing in startups from ride-sharing to meal-delivery apps and grabbing as much online territory as possible, Baidu made few such investments. A Baidu executive said the company missed opportunities because its investment arm needed Mr. Li's approval for any deal worth more than $3 million. Baidu generated more than $10 billion of revenue in 2015.

Late to the game, Baidu spent $1.9 billion on Android app store 91 Wireless to gain access to mobile internet users. The deal turned out to be an expensive failure. Mr. Li told investors in 2015 that Baidu would spend 200 billion yuan (US$29 billion) on online-to-offline services such as meal delivery and group discounts. He pulled back a year later, after engaging in a heavily subsidized competition for customers with startups backed by Alibaba and Tencent.

A boyish-looking man with a master's degree in computer science from the State University of New York at Buffalo, Mr. Li, 48 years old, used to have an adoring following online. A fluent English speaker, he occasionally appeared at big conferences, sometimes with tech sages like Bill Gates.

At Baidu, though, Mr. Li is known for holing up in his office much of the time. He doesn't communicate frequently, even with his direct reports, the former and current Baidu executives say.

Sometimes executives go to Mr. Li's wife, Ma Dongmin, to promote their ideas, finding her a conduit to get feedback from her husband. Ms. Ma rejoined Baidu officially this month to be Mr. Li's special assistant, according to a Baidu executive.

A Baidu spokeswoman declined to comment on Mr. Li's management style and Ms. Ma's role. Mr. Li said at the press conference that his management style is to let subordinates with whom he disagrees do things their way until they are proven wrong.

One Baidu executive says that he sympathizes with Mr. Li because both are programmers-turned-managers. "I think we have the same management problems: we don't like communicating and want to stay out of politics," he says. "He made the right decision by stepping aside."

--Follow Li Yuan on Twitter @LiYuan6 or write to li.yuan@wsj.com.

Write to Li Yuan at li.yuan@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING 0.12% 181.5 Delayed Quote.32.41%
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