What did Baidu do with its 7 billion research funds?

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It is said that this is Baidu's investment in R&D in 2014. According to Baidu's annual financial reports, Baidu's investment in R&D was 4.107 billion yuan in 2013, 2.305 billion yuan in 2012, 1.334 billion yuan in 2011, 718 million yuan in 2010, and 422.6 million yuan in 2009.

In terms of the growth rate of R&D investment, it increased by 70.2% in 2014 compared with 2013, 78.2% in 2013, 72.7% in 2012, 85.8% in 2011, 69.9% in 2010 and 47.6% in 2009.

Judging from the amount, Baidu's investment in 2014 was indeed the highest in history, but judging from the growth rate, 2014 was not the year with the largest increase in Baidu's R&D investment.

However, we note that in the past five years, Baidu has invested a total of 15.8766 billion yuan in research and development. From 2010 to 2014, Baidu's investment in research and development increased by an average of more than 70% per year.

So, with Baidu spending hundreds of millions of yuan on research and development every year, what results has it produced?

Based on the statistical data from the website of the State Intellectual Property Office, we take a detailed look at the "assets" of Baidu's R&D results from multiple dimensions, including the number of patents, patent structure, patent trends and application time distribution.

Patent scale: Although Baidu was established 5 years earlier than 360, its leading advantage is not much

From the table above, we can see that Baidu and 360 are evenly matched in patent protection. In terms of the total number of searchable patents, Baidu is only 3.9% more than 360, in the number of invention publications, Baidu is only 2 more than 360; in the number of invention authorizations, Baidu is 20.9% more than 360; in the number of utility model patents, Baidu is twice that of 360; and in the number of design patents, Baidu is 24.4% more than 360.

On the surface, Baidu's patent indicators are slightly ahead of 360. However, one fact that cannot be ignored is that the earliest related company under Baidu was established in 2000, and the earliest related company under 360 was established in 2005.

In other words, although Baidu was established nearly five years earlier than 360, Baidu's leading advantage in patent achievements is not proportional to this.

As for Baidu, although it gives the outside world the impression of being a technology-driven company, for quite a long time it did not focus on technology research and development centered on patent protection.

As for 360, although the company started late and gives people the bad impression of being keen on "war of words", it attaches great importance to technological research and development with the purpose of building patent barriers and has achieved remarkable results.

Patent structure: Baidu's invention patents need to be strengthened

Among the three common types of patents in China, the technical "gold content" is ranked from high to low as follows: invention patents, utility model patents and design patents. In addition, this "gold content" ranking is also a reflection of the difficulty of patent authorization.

Specifically, invention patents and utility model patents have very high requirements for the "novelty, creativity and practicality" of invention applications, while design patents emphasize "obvious distinction", that is, "no duplication".

From the above figure, we can see that among the authorized patents, Baidu's proportions in invention patents, utility models, and appearance designs are 49%, 10%, and 41%, respectively. 360's proportions are 53%, 4%, and 43%, respectively. The proportions of HTC, a smartphone manufacturer from Taiwan, are 74%, 9%, and 17%, respectively.

It can be seen that the patent structure of the two companies is trying to align with the patent structure of patent giants such as Apple and Samsung, that is, to attach importance to "invention patents" and "appearance designs". However, in terms of the proportion of invention patents, 360 is slightly ahead of Baidu.

It should be noted that the reason why utility model patents are not valued by international patent giants such as Qualcomm, or that international patent giants rarely deploy "utility model patents", is because utility model patents are not international "hard currency" and have strong regional restrictions. Many countries have not established this type of right separately.

The purpose of protecting utility models in China is to encourage the creation of small inventions with low costs and short development cycles, so as to adapt to the needs of economic development more quickly.

Patent output: The output in the first five years of 2010 was less than 30% of that year

After more than ten years of development, Baidu has formed a "matrix" of dozens of affiliated companies, including Beijing Baidu Netcom Technology Co., Ltd., Baidu Online Network Technology (Beijing) Co., Ltd., Baidu Times Network Technology (Beijing) Co., Ltd., Baidu Yixin Network Technology (Beijing) Co., Ltd., etc.

Among them, the patents owned by Baidu are mainly held by Beijing Baidu Netcom Technology Co., Ltd. and Baidu Online Network Technology (Beijing) Co., Ltd. At the same time, these two companies basically cover more than 99% of Baidu's patent applications.

Although Baidu successfully landed on the Nasdaq stock market in the United States as early as August 5, 2005. However, since Baidu was founded in 2000, until 2006, the number of patent applications submitted by Baidu and the number of patents finally authorized can be described as "countable on one's fingers".

From the above three figures, we can see that Baidu did not increase its patent layout until 2010, when it was ten years old. Among the patents that Baidu has been authorized, 71 invention patents were applied for in that year, accounting for about 36% of the total number of invention patents that Baidu has been authorized to obtain.

Baidu has only started to test the waters in terms of design since 2012. It is worth mentioning that more than 97% of the designs Baidu has been authorized for were submitted in 2014, covering the following areas: mobile phones (119), tablets (8), computers (28), chopstick chargers (1), headphones (1), and smart glasses (2).

In terms of investment, 2010 was a watershed year for Baidu’s R&D investment. After that, Baidu’s R&D investment exceeded RMB 1 billion per year, with an annual growth rate of 80%. However, in terms of output, before 2010, Baidu’s total patent output for five consecutive years (2005 to 2009) was less than 33% of that year (2010).

There may be three reasons for this: 1) Before 2010, Baidu's R&D investment may not have been fully invested in the development of new products or new technologies, but a large proportion was used in the maintenance or update of existing systems or technologies. 2) Before 2010, Baidu did not attach importance to the R&D management model of building patent barriers, and had innovations but did not apply for patents in a timely manner. 3) It cannot be ignored that 2010 was also the year when the domestic mobile Internet rose rapidly. That year, 3G licenses were issued for a full year, and smart phones began to become popular. Mobile Internet or mobile Internet access brought a great impact to Baidu, which was mainly based on PC Internet at the time, and Baidu had to speed up its investment and layout in mobile Internet.

Invention publication is an important step in the examination of invention patent authorization, and can also reflect the characteristics of an enterprise's invention patent application layout.

From the above figure, we can see that, judging from the time distribution of Baidu's invention applications that have entered the invention publication stage, before 2012, Baidu's invention patents were still in a rapid growth stage. After 2012, it entered the "plateau period" of invention applications, maintaining a relatively high scale of invention patent applications.

However, from this perspective, the growth rate of Baidu's R&D investment is not synchronized with the growth rate of the number of Baidu's inventions published. As mentioned at the beginning of this article, since 2010, Baidu's R&D investment has maintained an average annual growth rate of 70%, but the number of inventions published has "decreased instead of increased."

There may be two reasons for this imbalance: 1) The excessive increase in labor costs has suppressed the increase in the output of innovative results; 2) The review period for invention patent applications is long, and some submitted patents have not yet entered the invention publication stage.

Judging from the contents of the invention patents that have been applied for, the invention applications of Baidu that have entered the invention disclosure stage in 2014 are distributed in many fields such as search, system, device, equipment, terminal, server, etc., involving geographic location applications, voice navigation, search recommendations, smart glasses, head-mounted devices, DNS, input methods and many other applications.

Among them, Baidu's patent layout related to smartphones deserves the attention of competitors. It should be noted that in 2015, traditional Internet giants have accelerated their layout of mobile terminals. 360 has joined hands with Coolpad, and Alibaba has invested in Meizu. A mobile phone war or mobile terminal battle between Internet giants is about to take place.

What is puzzling is how Baidu, which has already applied for more than 100 mobile phone-related design patents, will eventually enter the smartphone or smart terminal market?

You know, from the perspective of acquisition targets, there are not many targets left in the market that are worthy of mergers or acquisitions or investments, and from the point of view of timing, if you don’t enter, you will probably miss many opportunities for counterattack.