Baidu, the Chinese tech giant, overtook Google this summer to become the second-largest vendor of smart speakers in the world, but a senior executive believes the company can go further by turning the devices into the next smartphone.
While voice-activated devices arguably remain a niche product in many markets, Baidu – along with other major Chinese tech firms like Alibaba and Xiaomi – see huge opportunities in China.
According to a recent study from research firm Canalys, Baidu’s smart speaker shipments reached 4.5 million units in Q2 2019, equivalent to 17.3% of global market share and representing vertiginous growth of 3,700% since the same quarter in 2018.
In addition, the overall Chinese market – at 12.6 million sales – was more than twice as large as the US market, which stood at 6.1 million units.
With growth advancing at such a rate, Jing Kun, Baidu’s recently appointed VP of its smart living group, said the company would adapt by shifting its core search business to voice.
“The early signs are that when these devices enter people’s homes they become the core of that home,” he said in an interview with the Financial Times. “That is why all the leading [Chinese tech] companies are making smart speakers.”
He said the speakers have already “crossed the chasm” to become commercially viable because of the regularity with which they used – an average of 20 to 30 times a day for about two hours in total.
Part of the reason why smart speakers have soared in popularity in China is because the main domestic vendors, including Baidu, have kept costs low by subsidising them.
However, Jing indicated that Baidu now plans to reduce its subsidy over time while it also explores the development of new revenue streams, such as a subscription model for video, music, education and gaming.
“For us, this fight is something that we have to win because this is the future of search,” he said. “So, we have been determined in our investment.”
Jing also noted that smart speakers have become especially popular in China’s lower tier cities, where people tend to have more spare time and buyers often treat the devices as they would a TV or sound system.
The question for Baidu and its rivals is whether the trend continues, so that smart phones become indispensable for millions of Chinese households and new revenue streams can expand.
But, cautioned Sophie Pan, a researcher at Beijing-based IDC: “The market is still in a phase of educating, cultivating habits and trying to reach as many users as possible.”
Sourced from Canalys, Financial Times; additional content by WARC staff