Baidu taps rich O2O seam for growth

An employee from an O2O platform in Beijing selects fresh fruit according to a client's orderreceived via his smartphone. Li Xin / Xinhua

Online search firm Baidu Inc is widening its horizons beyond the search business to real-timeservices, a top official said.

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

"In the past, our focus has been on searching the right information for users anywhere. In thefuture, 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 O2Osector. The company has spent billions of dollars to buy startups ranging from group-buying siteNuomi, 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 createa platform catering to all dimensions of location-based lifestyle, whereconsumers can buy movie tickets, order food deliveries and book rides as wellas 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 edgein technology will help Baidu have the "last laugh".

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

Baidu reported a 36 percent year-on-year fall in third-quarter operating profit despite a surge inrevenue, 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 UnitedStates, 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 willhelp 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 itscompetitiveness, it is important for Baidu to incorporate the search function with differentiatedservices. Mobile map services are a good option as consumers often start from location basedsearch when looking for products or services. That said, Baidu also needs to further expand itsmobile payment offerings."