Baidu is divesting from its global ad and tools business to focus on AI

Baidu, the Chinese internet search giant, has announced its intention to spin off its global ad and tools business into a separate unit. According to a press release about the decision, Baidu will divest a majority equity stake in its Global DU Business, which provides DU ads and tool apps, including Du Caller, Mobojoy, Photo Wonder, and DU Recorder. The company said that it has entered into “definitive agreements with certain investors” for the divestiture, and upon its completion, Baidu will own approximately 34 percent of the Global DU Business unit, effectively ceding control to the investors.

In a statement, Herman Yu, CFO of Baidu, said, “We have been able to build global adoption of DU ads and tool apps through Baidu’s strong technological team. Upon this divestiture, the Global DU business will have more autonomy and agility in its operation and will receive a cash injection to further support the growth of its business...This transaction marks another milestone for Baidu to sharpen its focus on AI-powered core businesses, on the heels of the divestiture of Baidu’s financial services business.”

As Herman said, Baidu recently sold its majority stake in its financial services arm in a deal worth about $1.9 billion. The Financial Services Group (FSG), as it’s called, received investment from TPG and the Carlyle Group, with participation from others such as ABC International Holdings, Taikang Group, and others. Baidu said that the divestiture from the Global DU Business is expected to close by Q3 2018, subject to certain closing conditions, and will lead to the deconsolidation of the business unit from Baidu’s consolidated financial statements.

Post the spin-out, Baidu plans to focus its new business unit on its AI-powered businesses, including PopIn, a leading mobile recommendation engine, the #1 input method Simeji app in Japan, and various AI products offered in the U.S. and throughout Southeast Asia. The company will also focus resources towards the development of its research centres in Silicon Valley and Seattle. However, the company’s AI division is also reeling from a series of high-profile personnel exits in recent months.

Just last week, Qi Lu, Baidu’s foremost AI specialist and the company’s President and COO, stepped down, citing personal reasons. In a statement to The Financial Times, Qi Lu said, “Due to personal and family reasons, I am no longer able to work in China on a full-time basis...Baidu is a great company with strong talent and deep technologies. I am highly optimistic on Baidu’s future and will continue to support Baidu while spending more time with my family in the US.” His departure came as a shock to many observers, particularly as he had taken over the COO role less than two years ago.

Baidu also lost Andrew Ng, the AI researcher who set up the company’s US research labs, in March 2017, and Adam Coates, the Director of Baidu’s Silicon Valley lab, in September last year. Given these high-profile personnel exits from its AI division, it will be interesting to see how Baidu builds its AI capabilities further, particularly as global tech giants like Google and Microsoft raise the stakes.