The growth rate of smart speakers has slowed down. Will Baidu's decision to let Xiaodu become independent create the next wealth-making myth?

Finally, Xiaodu took the first step towards independent growth.

Recently, Baidu announced that its smart life business group (Xiaodu Technology) has completed independent financing, with a post-financing valuation of approximately 20 billion yuan. Based on this, the industry unanimously believes that Xiaodu Technology will be listed on the domestic Science and Technology Innovation Board in the next step.

Although Xiaodu's actions are similar to those of Ant Financial, a subsidiary of Alibaba, Xiaodu's core competitiveness is more technical. Therefore, the immediate impact of Xiaodu's independent financing and listing may not exceed that of Ant Financial.

However, precisely because of its strong technical background, Xiaodu's focus on "smart hardware and AI voice interaction" business is likely to become a "new infrastructure" for mobile life similar to Ant Financial in the era of smart homes and the Internet of Everything.

Smart speakers win first battle

In the past two years, as the trend of the Internet of Everything has intensified, the living room economy has become a major outlet for the technology industry. According to data released by the Forward-looking Industry Research Institute, the scale of China's smart home market is expected to exceed 180 billion yuan in 2020, and the shipment volume of related equipment is expected to exceed 1 billion units.

With the explosion of smart homes, consumers are also in urgent need of a centralized, low-cost, and interactive central control device to control fragmented IoT devices.

After market selection, Amazon's smart speaker Echo has occupied more than 75% of the US smart speaker market in just three years. It is also from this that smart speakers began to emerge and become the darling of the smart home market.

On the one hand, the smart home market has broad prospects, and on the other hand, there is the experience of Echo. In 2018, the newly established Xiaodu directly found a terminal implementation solution for AI technology and released the country's first smart speaker with a screen, Xiaodu at Home.

Although terminal manufacturers such as Alibaba and Xiaomi also entered the smart speaker industry after Xiaodu, Xiaodu has first-mover and technological advantages, as well as large-scale subsidies. Therefore, Xiaodu smart speakers have also achieved remarkable results in the market.

Canalys data shows that in the first half of 2020, Xiaodu smart speaker shipments ranked first in the Chinese smart speaker market, continuing the record maintained in 2019.

Although Xiaodu is relieved to maintain its position as the market leader, the sharp downturn in the overall market trend of smart speakers caught it off guard. According to data from CMM, the total sales volume of China's smart speaker market was 19.086 million units in the first half of 2020, a year-on-year increase of only 22.7%, no longer the amazing three-digit growth rate of the past.

Although Xiaodu smart speaker still ranks first, it is destined to reach its ceiling soon amid intensified industry competition and slowing market growth. This is not good news for Xiaodu.

Aiming at large-scale application scenarios

Unlike traditional application technologies, Xiaodu has great advantages in core technologies such as AI. Therefore, even if the smart speaker industry is no longer prosperous, Xiaodu can still expand rapidly as long as it finds suitable large-scale commercial application scenarios.

From this perspective, the initial success of the smart speaker means that for Xiaodu, the experimental significance of the application scenario is far greater than the pure commercial significance. In fact, in addition to smart speakers, we do see that Xiaodu has a broader business prospect under large-scale application.

First of all, from the C-end, true wireless Bluetooth headsets have gradually been sought after by consumers since 2017. IDC data shows that in the first half of 2020, shipments in China's wireless headset market increased by 24% year-on-year, reaching a total of 42.56 million units.

However, the products on the market of true wireless Bluetooth headsets are highly homogenized, and most of them are nothing more than focusing on "true wireless" and "portability". Xiaodu keenly perceived the defects of true wireless Bluetooth headsets and its own technological advantages, so it launched the "Xiaodu True Wireless Smart Earphones" for only 199 yuan, adding the revolutionary function of AI to traditional true wireless Bluetooth headsets.

Judging from the market feedback, the "Xiaodu True Wireless Smart Earphones" were sold out on multiple e-commerce platforms such as JD.com and Tmall Xiaodu Mall within just a few minutes of going on sale, forcing Xiaodu to urgently restock. This shows that Xiaodu has indeed made the right bet.

Secondly, in addition to selling products directly, Xiaodu can also provide some targeted technology output. It is understood that Xiaodu Assistant currently focuses on three scenarios: smart home, portable devices, and smart car, and can be applied to a variety of terminals such as speakers, cars, and TVs. According to Baidu, the number of partners of Xiaodu Assistant has exceeded 300, and there are more than 160 devices with Xiaodu Assistant built in.

In addition to bringing short-term commercial benefits to Xiaodu, this B-side technology output can also enable Xiaodu to master the most important ecological resources in the era of the Internet of Things, and reversely empower terminal products such as speakers and headphones within the Xiaodu ecosystem in the long run.

Based on Xiaodu's technical advantages in AI and ecological resources in connectivity, we can see that Xiaodu's business actually has strong commercial barriers. In the future, under this barrier, as long as Xiaodu launches terminals with incremental space according to product inertia, even if a single category, such as smart speakers, slows down, it will basically not have a fatal impact on Xiaodu.

Reality is the reverse force

Admittedly, Xiaodu's technological advantages and business barriers are the main driving factors for its independent financing and subsequent listing, but if we consider the macro level, we can find that Xiaodu's independence from Baidu also has a considerable reverse driving force.

Due to inherent impressions and historical reasons, Baidu has actually been undervalued in the capital market. As of September 29, Baidu's market value was only 42.249 billion US dollars. However, iFlytek, which has similar core technology to Xiaodu, has a market value of 75.321 billion yuan (about 11 billion US dollars), which is almost 1/4 of Baidu. Therefore, Xiaodu's independence can largely obtain a more accurate and clear commercial value.

On the other hand, from a realistic perspective, although Xiaodu has a very broad business prospect, it still cannot escape the fate of "losing money to subsidize and earn traffic" in the mobile Internet era. Take Xiaodu at Home as an example. Its original price was 1,599 yuan, but when it was released, it was reduced by 1,000 yuan to only 599 yuan. From this perspective, Xiaodu's independent financing and listing can also reduce Baidu's burden. At the same time, since Xiaodu's business needs the support of the ecosystem, after an independent listing, Xiaodu can also attract third-party capital forces and seize the entrance on a larger scale.

More importantly, in the US stocks where Baidu is located, there are many mature commercial companies with similar business models to Xiaodu, which is likely to overshadow Xiaodu. However, in the Science and Technology Innovation Board, AI companies are very rare, and Xiaodu, which is affiliated with Baidu and has a very healthy business model, is likely to enjoy more capital dividends.

Interestingly, JD.com, which ranks second, has actually set an example for Baidu. The total valuation of JD.com's logistics, JD.com Digital Technology, and health businesses in the capital market has reached nearly $90 billion. Based on this, industry experts believe that not only Xiaodu, but also Baidu's highly competitive cloud storage, autonomous driving and other businesses are likely to enter the capital market in the future.

In general, although Baidu missed the entire mobile Internet era, it has accumulated technical resources that are difficult for ordinary companies to achieve due to its hard work in AI technology. According to Baidu, as of the beginning of 2020, its global AI patent applications have exceeded 10,000, of which more than 7,000 are related to China, ranking first in China. Therefore, when the blue ocean of the Internet of Everything just appeared, Xiaodu was able to seize the resources at the first time.

More importantly, Xiaodu is not seeking quick success in a specific field, such as smart speakers, but is building a full-dimensional industry and ecosystem from a macro perspective. This ensures that Xiaodu has certain business barriers, leaving its competitors far behind in the short term.

In this sense, although there are certain realistic factors in Xiaodu's unsealing, considering its first-mover advantage and technological barriers, the current valuation of 20 billion yuan may just be the starting point for Xiaodu. Once it is listed on the Science and Technology Innovation Board, it may create another Internet "benefit myth."

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.