Earnings Call: Q4 2020

Feb 18, 2021

Hello, ladies and gentlemen, and thank you for standing by for Baidu's 4th Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Jun Lin, Baidu's Director of Investor Relations. Hello, everyone, and welcome to Baidu's 4th quarter and full year 2020 conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as on For today, we have Robin Li, our Co Founder and Chief Executive Officer and Zou Shen, our Executive Vice President Under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties financial results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our filings with the SEC, including our annual report on Form 20 F. Baidu does not undertake any obligation to update any forward looking statements, Q4, except as required under the law. Our earnings press release and this call include discussions in unaudited non GAAP financial measures. IR website atir.baidu.com. As a reminder, this conference call is being recorded. In addition, Good morning, everyone. Baidu delivered another solid quarter in Q4 The Baidu core revenue reached RMB23.1 billion, that's US3.5 billion dollars which is up 6% year over year and up 8% quarter on quarter. The latter was Much higher than our historical flattish or low single digit growth from Q3 to Q4. In addition to the improvement of macroeconomic conditions in China, we are benefiting from the digitalization of industrial Internet. Baidu Core non advertising revenue in the 4th quarter grew 52% year over year to an annualized run rate of US2.6 dollars, driven by the convergence of AI solutions, cloud services and consumer Internet. Such convergence is expected to accelerate into the next decade and Baidu stands to benefit from it. Let me elaborate on the trends Starting from smart transportation. China aims to raise its global competitiveness in the transport sector Through aggressive infrastructure building, the Chinese government is promoting a multiyear plan to install smart transportation network in cities with sensors and cameras on public roads, connecting vehicles with show 5 units to foster safer driving, improve throughput and reduce carbon emissions. Such government initiative Encourages municipal government to shift their budgets toward a more software defined transportation network. Apollo's strong brand in intelligent driving and our holistic approach to smart transportation make us well suited to capture strategic partnership with Guangzhou in Southern China to deploy the world's 1st multimodel autonomous driving mobility as a service or M. A. S. Platform. Utilizing Apollo Robocasti and The Guangzhou smart transportation project takes advantage of Baidu's leading autonomous driving technologies and Baidu Cloud strong technology infrastructure as well as leveraging the reach of Baidu App and Baidu Maps to enable locals' easy access to Apollo's map. For enterprise cloud, we have seen ad customers subscribing to Baidu Cloud Due to our strong Internet foundation, for example, a major e commerce company and existing ad customers began using our 12 services a year ago. In the past year, the ad customer saw its business grow to active. When the customer realized that Baidu AI Cloud was able to support businesses with over 100,000,000 daily users And enable them to expand rapidly, the app customer increased its purchase of Baidu Cloud Services from a year ago. Over time, we believe Baidu AI Cloud From this example, we see strategic advantage of concurrently operating In the AI solution, cloud services and Internet market, as enterprises and the public sector embrace digital transformation to strengthen and expand their relationships with their customers and constituent online. As we enter the next decade, Baidu is well positioned as autonomous driving, smart transportation and other AI powered areas. Turning to Q4 operating highlights. Let me start with AI Cloud. Baidu Cloud continues Number 1 in China's AI public cloud market, per IDC's latest report, cloud services and solutions and differentiated in the market with our use of AI to our cloud solutions and improve our customers' operational efficiency and service level. Our AI solutions are demonstrating scalability and replicability across multiple industry sectors. For example, our AI call center solution, which Our first key customer, a major telecom operator, has followed up with 2 more purchases of our AI call center and install them in their customer service center nationwide. As we strive For customer satisfaction and best in class solutions, our AI call center solution has successfully expanded from telecom into other sectors, including airlines, financial services, energy and automobile. Through greater industry adoption, model training time has dropped by more than 50% and the project implementation has been shortened to 1 month. In the area of vertical cloud, The smart transportation project with Guangzhou serves as the life of project for other cities to follow. The deployment of Apollo math allows commuters to order robot taxis and robot In place of taxi rides or other public transportation, the implementation of V2X smart road infrastructure equipped 102 intersections and the in the knowledge city district of Guangzhou with cameras and sensors, enabling better traffic management. Commercial vehicles entering the vicinity are installing dual OS powered rearview mirrors to enable traffic violation enforcement which in essence is a transportation cloud solution. It processes traffic information from Apollo Maps and V2X, newer OS connected vehicles and Baidu Maps. It provides traffic agencies better information to improve traffic management and transportation services and Similarly, we recently signed a second contract with the city of Baoqing to expand coverage of Apollo Smart Transportation in their city. Our strategic partnerships with Beijing, Guangzhou, Shanghai and Chongqing to name a few to provide smart transportation is becoming an important milestone metropolitan traffic, public transportation and air quality. Turning to intelligent driving. We continue to invest aggressively in self driving technology for passenger vehicles and robotaxi fleet management. Uhono was once again ranked number 1 in China for autonomous driving According to the 2020 Beijing Autonomous Vehicle Stroke Tester Report, the report is highly respected in the industry as Beijing traffic authority closely monitors autonomous driving test miles. Apollo accumulated test miles Reached 4,300,000 in December. Apollo has been granted China's first driverless testing permit and is the only Chinese company to be granted driver testing permit from both California and China. In terms of Our autonomous driving operational experience, Apollo Robot Taxi and Robot Bus fleet have We are proud that DuraOS 4 Auto, our operating system powering auto infotainment, has been installed in over 1,000,000 new vehicles just last year, pointing to 2 market Baidu Smart Mini Program to populate its scale store. At the same time, Consumer benefits from the consistency and familiarity of dual OS devices from mobile and home environment. New car buyers are turning to best in class self driving capability so that they can do more enjoy their ride in cars. The risk towards building new vehicles with better self driving capabilities through AI creates Let me talk about the progress of Apollo Self Driving or ASD, which To date, we have signed strategic partnership with 10 leading automakers Our HD Map, a critical component for self driving to top automakers in China. We have invested in Baidu Maps for many years and are one of the very few companies in China offering HD Maps. Last month, WM Motor, a leading Chinese e vapor, announced the mass production of their new W6 SUV due to release in the first half of this year. With Apollo Automated valid parking for AVP, a double 4 service auction. We are excited to announce that This comes timely as MIIT, China Transport Agency, releases draft regulations to allow highway testing We believe end to end integration of hardware and software will make the best vehicle. That's why we are in the process of setting up an intelligent EV company and we have entered into strategic partnership Multinational Automaker Zhejiang Jiwi Holding Group to offer automobile design and manufacturing Geely brand. By combining Baidu's expertise in autonomous driving and smart transportation with Geely's expertise. As a leading automobile and EV manufacturer, we hope to pave the way for the future passenger Turning to DuerOS, which continues to see strong adoption. Monthly watch queries from 3rd party devices Reached RMB3.6 billion, that's up 66% year over year. And Duo Skill store now offers over 4,400 skills. Our focus on user experience through leading AI capabilities has made Xiaodu's market place number 1 in global shipments again. According to all 3 market research firms, IDC, strategy analytics and Canalys for the Q3 of 2020. Turning to mobile ecosystem. In December, MAUs of Baidu App reached 544,000,000. The number of creators on Baiduhao nearly tripled. The total number of Smart Mini Programs grew 124% from a year ago. The MAUs of Smart Mini Programs reached 414,000,000. This number The same trend can be seen in our vertical and community efforts. For example, On a quarter over quarter basis, daily average viewership of videos on Baidu Health grew 92% and daily average live video session hosted by healthcare professionals grew 153%. E commerce touches the lives of 1,160,000,000 Internet users each month in China. Through our AI building blocks, we enable users to have single log on, meaning that a user can log into our app to check his or her express delivery status or summon express delivery pickup just by searching and clicking the applicable delivery company search results. The service convenience of our AI building block enabled daily express delivery service usage to surpass 4,000,000 times just a month after going live in Baidu. The vibrancy of our mobile ecosystem allows third party services to quickly ramp up and our search nature support the survival of long tail services. Daily login users on Baidu app Surpassed 70%, up 18 points from 2 years ago, which creates a strong foundation for further growth For the Q4, revenue for Managed Page reached a third of Baidu Core's online marketing revenue, up which enables them to purchase marketing services, build audience, generate themes and maintain lifetime relationships with service offerings. Our marketing cloud service provides CRM like services, for example, allowing merchants to message customers Who have previously interacted with them. So such feature facilitate retargeting and other measures to improve overall marketing effectiveness. We aim to integrate YY Our non advertising revenue represents a much smaller percentage, which means there is a huge potential for upside. The YY acquisition will help speed up the divestment of our non ad revenue. We believe such large scale product integration will create significant synergy in content, infrastructure and monetization. We also plan to leverage YY to accelerate the divestment of information and knowledge centric live streaming This effort will not only improve user stickiness and vibrancy On our large Internet platform, we believe live streaming has the potential to evolve beyond host taking to become a major way For communities, Baidu to further develop and merchants to increase their user engagement and grow their social asset on the Baidu platform. User attention usually shifts And we are excited about this opportunity. With that, let me turn the call over to Ermin to go through Thank you, Robin. Hello, everyone. Welcome to Baidu's Q4 2020 All monetary amounts used in my discussion are in renminbi unless stated otherwise. Despite an unprecedented year, our business has And we are benefiting from a rebound of the Chinese economy. Concurrently, our non advertising revenue is growing rapidly, especially for the new AI business. Non advertising revenue was up 52% in the 4th quarter, reaching 18% of Baidu core revenue. We recently conducted a TAM service exercise As part of our strategic planning process and found that the TAM for our non advertising business, including Internet value added services, cloud services and intelligent driving before adding autonomous driving was 10x the size of our online marketing TAM, and the expected CAGR to 2025 is 3 times that of our online marketing TAM. The potential for our non advertising business is quite significant. For example, we recently signed a smart transportation project whose contract amount was more than half a quarter's worth of our auto online marketing revenue. There are over 100 cities in China with a population of over 1,000,000. When you consider a robust project recently experimenting Collecting RMB25 for each ride, if fare collection becomes feasible, we could see an increase in robotaxi demand, which could drive our mass revenue under Transportation Cloud, the service component of fleet management. For fiscal 2020, Baidu core revenue reached US12.1 billion dollars and we spent 21% of research and development, Which is a testament to our commitment to technology, especially in the area of research. Our consistent heavy investment in technology has made Baidu Paddle Paddle the number 2 deep learning framework in the world. Baidu opened AI platform the largest developer community of its kind among Chinese companies and our AI patent portfolio, the largest in China. Our investment in AI runs the gamut of technology, developer communities, IP patents, AI chip design and talents. As we began to commercialize AI at scale, The incremental revenue that we derive will be reinvested into product development, sales and project delivery to further accelerate AI commercialization and strengthen our moat in our AI business. Unlike 2C business, 2 gs will require that we hire developers, sales and engineering delivery personnel a few quarters ahead before they start contributing to revenue. Q2. We shall also gain synergy coming from multiple businesses scaling, while leveraging off of Baidu Brain, our core AI engine. We are excited about our non advertising opportunities from cloud services to smart transportation to segment as well as non advertising upside under our mobile ecosystem. Turning to financial highlights. Total revenue for the 4th quarter reached $30,300,000,000 or $4,600,000,000 increasing 5 year over year. Our business improved mainly from Baidu Core, which was up 6% year over year in the 4th quarter to USD $26,600,000,000 compared to down 13%, down 3% and up 2% Q1, Q2 and Q3 respectively. Let me give you more color on the progress of each component of Baidu Core. Our AI cloud grew 67% year over year, reaching RMB 2,000,000,000 on annualized basis. Cloud growth benefit from enterprise customers coming from the Internet Media Business, Financial Services, Transportation and Healthcare sectors. Our Intelligent Driving and OGI revenue is also growing, but its near term contribution may not be as apparent. Apollo Self Driving, what we call ASD services are booked on a multiyear basis and we recognize revenue when an automaker's new vehicles Our shift with the installation of our ASD services. We have signed strategic partnership with 10 leading automakers for ASD, And we are taking orders for Economist Navigation Pilot, or AMP. On mobile ecosystem, many of our ad verticals are growing, including healthcare, education, Internet, retail, real estate home furnishing and auto. In app advertising, the majority of Baidu core ad revenue continues to see double digit growth, benefiting from the growth of search queries and CPM. Ad revenue is partially offset by Baidu Union, where we are prioritizing profitability over revenue growth. IQIYI revenue reached 7,500,000,000, Down 1% year over year. IQIYI subscribers reached 101,700,000 in December, further strengthening its foundation to produce entertainment blockbuster originals. Non GAAP operating income for Baidu and Baidu Core was $7,100,000,000 $8,000,000,000 or $1,200,000,000 respectively. Non GAAP operating profit was down 5% For Baidu Core and non GAAP operating margin for Baidu Core was 35%. Cost of revenue was RMB14.5 billion, down 6% year over year, primarily due to the decrease in content costs, traffic acquisition costs, bandwidth costs and the amortization impairment of intangible assets, partially offset by an increase in cost of goods sold. SG and A and R and D together were RMB10.5 billion, up 24% year over year, primarily due to an increase in promotional R and D personnel related expenses. Adjusted EBITDA for Baidu and for Baidu Core were $8,600,000,000 $9,400,000,000 $1,400,000,000 respectively. Cash and short term investments for Baidu and Baidu Core at the end of the year were 162,900,000,000 and $148,600,000,000 or $22,800,000,000 respectively. Free cash flow for Baidu and Excluding iQIYI were $3,800,000,000 $5,400,000,000 or $827,000,000 respectively. Baidu Core had approximately 32,800 full time employees as of December 31, up 14% from last year. During the 4th quarter, we returned $600,000,000 to shareholders, bring the cumulative share repurchase in 2020 to US1.9 billion dollars compared to US709 million dollars 2019. Turning to Q1 guidance. For the Q1 of 21, Baidu expects revenue to be between RMB26 1,000,000,000 and RMB28.5 billion, representing a growth rate between 15% to 26% year over year, Which assumes that Baidu core revenue will grow between 26% and 39% year over year. This guidance does not include any contribution from the acquisition of YY Life. And the above forecast reflects our current and preliminary view, which is subject to substantial uncertainty. Before I turn the call back to the operator, let me summarize our 4th quarter results. We have made significant strides in preparing Baidu for the next legs Our heavy investment in technology has allowed us to build leading AI technology and put us in a strong position to pursue huge, fast growing market opportunities such as cloud services, smart transportation and intelligent driving, which includes self driving services, intelligent electrical vehicles and autonomous driving. The TAM for our non advertising business before including autonomous driving is about 10x that of our online marketing business and the CAGR is 3x faster. We get a glimpse impact of these opportunities with Q4 non advertising revenues growing 52% and already reaching 18% of our core revenues. We view Baidu Core's business on 3 revenue growth curves: mobile ecosystem, AI cloud, intelligent driving and OGI. With non advertising value added services in AI Cloud to boost our near term revenue growth and with intelligent driving and other growth initiatives in the public sector. Robin gave an example in the smart transportation sector. We are also seeing this trend in the health sector, where we are working with hospitals to provide their services and doctors greater Internet presence. Some causes trend in industrial Internet where there is a deep integration with enterprises in the public sector of each industry and provide them with a turnkey solution to Internet presence. Our strength in building technology infrastructure puts us at an advantage in the current Internet environment where synergy is generated from our offering of cloud, other growth initiatives and mobile ecosystem concurrently. Our mobile ecosystem is benefiting from a rebound in the Chinese economy On capital allocation, our share repurchases in 2020 totaled US1.9 billion dollars which reflects the conviction that we have in the direction of our business. Over the past 2 decades, we have demonstrated track record for long term growth and strong profitability. The heavy investment that we are making to seize growth potential puts us on a path to further improve our long term growth. Let me end by Talking about our efforts in ESG, we recently released 4 series of ESG report clarifying our policy in anticorruption, non discrimination, privacy protection, data security, talent empowerment and low carbon commitment. More importantly, Baidu's effort in autonomous driving, including empowering EVs and robotaxis as well as smart transportation, decreased carbon dependency and enabled the improvement of traffic congestion and air quality through AI and cloud services supporting green energy and green environment. We are pleased that Baidu's ESG ranking was raised twice last year as we improve the communication of our ESG efforts. With that, operator, let's open the call to questions. Thank you. Ladies and gentlemen, we will now begin the question and answer your first question comes from the line of Alicia Yap from Citigroup. Please ask your question. Hi, good morning. Good morning Robin, Herman and Zhen. My question is related to your partnership with Eili. Can you share with us some colors on the expected timeline for this new EV to be released and what Baidu wanted to achieve out of it. Will Baidu also continue to seek for partnership with other OEMs to co produce other EV? And just related to that is, it seems like GDE is also working with multiple AD companies and also working on developing their own ADAS. So how would you describe the partnership and your relationship with JD? Thank you. Alicia, this is Robin. Let me answer your question. Our partnership with Geely is based on the belief that end to end integration with hardware and software will provide the best experience for autonomous driving or SMART EV. And in the past, we had a lot we have developed a lot of very advanced autonomous driving technologies. We We try to push this to integrate into our OEM customers, but most of the Traditional OEMs tend to wait until someone else adopts the newest and latest technology. That's why we decided it's time for us to just view a benchmark vehicle to show that how good the experience is. It also serves the purpose of a better and Faster and stronger feedback loop so that we can improve our self driving technology faster. Right now, the venture is progressing very well. We have a CEO on board and we have decided on the brand As you know, it takes it really takes around 3 years from beginning to the launch of a new EV model and we try to do the same for this new venture. On the other hand, Apollo and Baidu Brain, In general, it remains to be a very open platform. We will continue to work with other OEMs to provide the The technology and the products to them whenever that is needed. We will serve them to our best efforts. And in the past, Without someone first trying, they tend to wait. Now, we have We have benchmark they can follow. I'm Sure. It will also help the revenue of the Apollo technology provider Our next question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question. Good morning, guys. Just have a follow-up question on AI Cloud. I remember one of the key seasons behind AI Cloud is that it should have better margins than some of your which are focused on some of the more infrastructure cloud services. So just wondering If you can offer some, not necessarily a very quantitative guidance, but some margin outlook for your AI cloud business given some of your competitors already achieving a breakeven status? Thank you. Yes. Hi, Eddie. Happy New Year. This is Huynh Lin. I'll take that. So For our cloud, we have several pieces of business in our cloud. We talked about our enterprise cloud, which is But we differentiate in the market with AI solutions such as PaaS and SaaS. And clearly, when we're able to We see there's much more profitability to be made over the apps. But what we have to recognize When you're going into a software space of passion apps, initially, it might not be very profitable. For example, the AI solution that Robin talked about when we did our first solution a couple of years ago, that was actually very, very poor margin Because you're going into a new environment, you might have a good product, but you got to spend a lot of effort to integrate with your existing legacy So as you build that out, as you're selling to more customers and so forth and you make your The product was standardized, then the next few versions with this allows your profit margin to increase. So because we're growing so We're trying a lot in the product. We would not expect proper margin at this stage to be Very profitable. But when we look at our product lifecycle, such as the automated AI solution, customer solution, Call center. We can see that over time that, that margin trends up. So to answer your question, I think on the one part On enterprise cloud and so forth, 1, our margin is going to be a function of how much is pass and how much is pass and how much is add. I think as over time because we're differentiating with SaaS and PaaS, over time when that proportion teams grow bigger and bigger, I think our Profitable would be better, especially when the products matures. And then another big part of our cloud is, for example, vertical Such as smart transportation. And again, that principle of product maturity, that principle of What mix of that is software and so forth. I think overall all of this would be very helpful. And just to answer your question, some of our Competitors might be profitable and so forth. I think it really depends on the business that you want to be in. And unfortunately, we don't have the luxury of some of our peers where they can just allocate expenses to their other businesses and so forth because the infrastructure is So I think profitably, I think one is how you do allocation expenses. Another is, are you focused more on software? Do you have I think these are determinations of future profitability. Thank you. Our next question comes from the line of Piyush Mubayi from Goldman Sachs. Please ask your question. Thank you for taking my question and congratulations Rob and Hammond for a splendid quarter, a great outlook. Can I just go back to the intelligent EV company that you talked about Robin? And you talked about a 3 year lead time to get a car to market under The name so you selected a name, let's call it Baidu car for the time being. Why would it take 3 years for that to happen first and second? When you launched that car and I'm just trying to fish here also, what segments are you targeting? And are you targeting A certain market share in this explosively growing market. And we're trying to get a better sense of how this will evolve with time. And while this is happening, what happens to the revenue lines if we start to see accrue from the AMP in particular? So if you could give us a sense of what pricing could be like with products like the AMB that has just gone, I suspect, live right now. And I'll stop there. Hi, Piyush. Yes, as I mentioned that The reason we're doing this smart TV is that we want to bring the best out of our technology to the market. So the selling point the main selling point of this new car model will be as well as better infotainment because of DuerOS for auto, etcetera, etcetera. We well announced that The price range or demographic target when we think it's matured enough We are really ready for that. But that being said, you can count on that that we will try to Speed up the process to launch this new car as soon as we can and it will The best car on the market, the best autonomous driving technology and best infotainment for The smartest car. People generally call for the class as EV, but for us, the real Point is not electric. The real point is intelligent. And we are best in terms of the intelligent Yes. And let me elaborate that, Aphiuch, just to go a little bit deeper, give you more color on the meaning of intelligence. So when you look at EVs, right, there are several components. For example, there is the ASV, Apollo self driving services that we talked about. That would be HD Maps, that would That would be a navigation pilot, stuff like that, right? And our model is Different than most of EV manufacturers where we license OEM, right? So we can spend that R and D and then because our market is not just Limited to how many cars we sell. It's open platform, so we sell to many OEMs. That's number 1. Number 2, in addition, Being able to power the operating system of infotainment, that's very key because that requires a big ecosystem where you have a lot of content, So, Duerin, as for auto, as we mentioned, we've already been in spot for over 1,000,000 cars 2020. And again, that's the model we're working with several OEMs. So we have the edge in these two areas. In addition, we're doing autonomous driving so we can leverage that technology. And more important, you guys realize we're doing this on an ecosystem basis. So on the one hand, it's making B2X with strong transportation because a lot of the data is being gathered on our transportation cloud. Whether it's on the road, whether it's through the maps, whether it's connected vehicles so forth. We can understand the role better. So all of that data and that capability would then empower our EV. So two things. Number 1 is we think our EV can be more intelligent because we're doing other components and Because R and D is centralized and it supports other manufacturers. And secondly, because of our ecosystem strategy, we were coming up from patient angle and also from the different components. Thank you. Our next question comes from James Lee from Mizuho. Please ask your question. Great. Thanks for taking my questions and congrats on the excellent quarter here. On the smart transportation side, can you guys maybe provide some framework On the government's plan in terms of building out across the country, should we think about that build out being maybe top 30 markets? And also maybe help us understand the bidding process for CD contract a little bit. Do they choose multiple vendors And tech standards to do testing and what is your key advantage compared to other operating systems? Is it your experience autonomous driven miles or your ability to offer multiple services on the platform. And also lastly, maybe Herman, you can address Can you talk about the level of investments that is needed to make for smart transportation and also for autonomous driving over the next few years. And will you be breaking out the core advertising margin separately, so we can also see the organic growth? Sorry for long winded question. Thanks. Hi, James. In terms of smart We are the pioneer of the ACE concept, which means that using more software centric solutions to improve the throughput to Connected road with vehicles and to help reduce accidents and Reduce carbon emission. Yes, when we talk to the potential Customers of all kinds of different tier cities, they will obviously compare and invite Multiple vendors to bid on those kinds of projects. But in almost all cases, we So much ahead of any competition. Essentially, if they care more about The effectiveness of those smart transportation projects, we win. So we're so much ahead because Apollo system is very open and we've invested in this area for many, many years and Our AI capability provides a very solid foundation, and we have been doing a lot of customization for smart transportation. As Herman mentioned previously, initially, The margin could be low, but when we repeat this kind of project city after city, the Margin improved and the overall gross margin for Smart City Smart Transportation Projects keep improving. It's segment. Yes. Hi. So the good thing is when you look at our financial results, the amount that we're spending for autonomous driving and also for smart transportation is built into our model. So smart transportation is part of our AI cloud. So what you're seeing is already built in there. And you mentioned what does our margin look like for our core business. I Suppose you're asking for mobile ecosystem. So for mobile ecosystem, our margin on that on a non GAAP basis usually is between mid-40s to high-40s. And we've been pretty consistent in the last couple of years. Sometimes Revenue in a higher quarter, we might reach a little bit over 50, but usually it's around that range. And And we currently expect to be in that range right now. So you can see, as I talked about the 3 curve growth, mobile ecosystem will try to maintain within that range. And then for our new business and so forth, we look at it differently because that is more about We find the right to optimize growth for the next couple of years. Thank you. Our next question comes from Jerry Liu from UBS. Please ask your question. Hi, thanks management. Happy New Year. So my question first is just to go back to the revenue guidance for the Q1, Definitely a bit stronger than we even expected. So wanted to look at what are some of the key growth drivers here. On the non ad side, I would assume some of this is related to cloud and smart transportation. I'm wondering if there's any other key growth areas. And then secondarily, in the core advertising business, do we chalk this up to improving macro or are there some maybe different dynamics in terms of competition or products? Thank you. Yes. Let me answer it in different components. We talked about how non advertising is continue to outgrow our overall Baidu. So meaning it's going to because a lot of these are new businesses, it's going to be able to pull the weight. Smart transportation is part of cloud and we talked about how it's over a 60 some percent growth in Q4. So I think that with our strong offering and so forth, I expect this to continue to 2021, but do recognize that there is seasonality. For example, when you think about AI Cloud, Q4 tends to be stronger than Q1, just so how the budget works and so forth. But overall, I think non advertising is going to be driving us Not only in cloud, for example, in our other growth initiatives such as DuerOS and so forth. We think that these are all going to be engines of growth. Piyush talked about earlier about our Apollo self driving services. That well, it's a small base, but that growth also helps. So it's all of these things. And then with regards to our advertising business, I Several things. I think number 1 is the economy is coming back. So the macro helps certainly. But more importantly is Baidu We talked about in app services several times already because we're seeing user behavior switching from browser into Because we have AI building blocks, we're the only one at this scale in China where the app was designed as a search app and it's open. It allows worldwide web search. It allows content from all different apps and from all different websites. Because of that Because the content and services are on our platform making that closed loop native ad experience the best we think in China that AI building blocks provides. We think that, that helps user behavior and because of credit growth and so forth, That helps drive our revenue. And then also because it's native app, it's on a platform, obviously, CPM helps. So you have Thank you. Next question comes from Alex Yao from JPMorgan. Please ask your question. Hi, good morning management team. Thank you for taking my question and congratulations on a fantastic quarter. So I have a question regarding the YY integration. Robin, I think you mentioned that you guys plan to start integrating YY operation into your own content ecosystem in the coming quarters in your prepared remarks. Can I confirm that the deal is still going ahead with the previously announced valuation despite of the Money Water report and the changing regulatory environment of live broadcasting business in China? And then I think you also mentioned New business opportunities will gradually unfold as you guys integrate YY's live streaming operation capability into your ecosystem. Can you talk us through some of the key addressable market and the business model that will potentially Unfold with the integration process. And lastly, perhaps Herman, can you talk about how We think about the financial impact in the coming quarters as you guys consolidate business and integrate the operation into your Alex, let me first answer the business model questions, and I'll let In terms of this model, we basically view live streaming as yet another new form of Content and also new form of monetization. For content, live streaming is comparable to Text, images and videos, including long and short form videos. Live streaming is just a new form of media. It serves the user fast when you combine all kinds of different media forms and provide them the right form of media whenever necessary. And YY apparently provides a very vibrant and also mature ecosystem for live streaming content. Although they are more show based content, but the capability can be transformed into other form of live knowledge or e commerce related live streaming. And In terms of monetization, we view that the Baidu platform as a whole mobile system with 100 of millions of users log on to our platform on a daily basis, and we increasingly provide More native ad experiences, super majority of the users locked in So that we know who they are and they can have a better experience going from here to Right now, the large user base is primarily monetized through advertising. This is On Euro, when you compare with other large mobile ecosystems, They typically have more than 50% of their revenue coming from non advertising. And for Baidu, in addition to advertising or online marketing, we can monetize our user base Through live streaming, through subscription, through e commerce and many other forms of revenue That's the rationale behind the YY acquisition. Alex, can you help me with that question on Muddy Water report again? I didn't hear the whole thing. Yes. I mean, I just want to clarify the transactions still going ahead despite of the money order Report and the changing regulatory environment. And also, the deal is the deal still going ahead with the previously announced evaluation. Yes. So you asked quite a mix of questions. With regards to the Muddy Water report, I think Joy has come out with a statement. As you guys know, they That's a joy announcement, not a Baidu announcement. So I think looking at that would be the best. With regards to a regulatory environment, we are cognizant The situation and that's why we think that in order to navigate as you know, you have a lot of experience Looking at this, as you know, whenever there's a regulatory environment that you have to steer toward, It's more important to have a bigger leading player in China who have good relationship with government, who knows how to do things correctly and so forth. And we needed an experienced team and that gives us a better reason. If we're going into a live streaming, we will buy a large experienced team. So this is more of an acquisition of a team rather than a particular product or just a business. It's the team talent With regards to the contribution and so forth, currently we're moving ahead what we're planning to integrate onto our platform as Robin has said. And we're currently dealing addressing with some conditions and procedures. And we still is on page 2 to Due to the closing, as we announced previously, we're moving ahead with this. And their revenue is usually between RMB2 1,000,000,000 to RMB2.5 So when we can confirm all of this thing that we think we will be able to come back with that revenue amount. And with regards to pricing and so forth, yes, our final agreement was the original price. We do have stipulations in the agreement to Protect Baidu shareholders. As you mentioned, there was somebody who bought a report. The big four of 2016 came in, did not see anything. The global attorney came in, did not see anything. But to protect us, we do have indemnification in there Thank you all. Thank you. Next question comes from Gregory Zhao from Barclays. Please go ahead. Hi, management. Thanks for taking my question and happy Chinese New Year. So we know now Baidu has several different business lines, cloud autonomous driving, mobile smart devices. Susan, in the daily operation, just want to know how the management team allocate your time spent and efforts among all the different segments and what's your current priority? And a quick follow-up on your ADS system. So you mentioned the partnership with some leading auto makers. So in future, what's your best guesstimate of the pricing of the systems? Do you think the existing products Such as Tesla's FSB is a good benchmark for pricing? Thank you. Greg, in terms of Time management, I would say roughly half of our time and AI cloud and intelligent driving and other growth areas. Because it's a relatively diversified portfolio of businesses, we try to set up You can be more independent and driven. For example, the smart EV company. We have a strategic partnership with a very separate incentive structure for the team. And we recently raised money for our smart On the Apollo smart driving services, We will continue to provide technology at a very open and flexible I talked about we offer HD maps, we offer AVP, we We offer AMP and potentially we offer other combinations of this kind of Technology and services. The pricing range Differ based on the period of the contract and Products we offer. And it's growing very quickly and it's I would say it's still evolving Very quickly. Yes. And let me just add a little, Greg. I think Robin was very With regards to answering your talent question, Robin talked about how he spent his time. But More importantly, as you may know, over the last 2 years, we have significantly strengthened our bench. So when you look at, for example, the leader of mobile ecosystem, Dou, he's a PhD and we not only have grown him from Barry Young joining us 6, 7 years ago. And also if you look at over the last 12 months, we've been aggressively hiring good talent You look at Doctor. Wang, again, he's a PhD and we have been helping him build his team underneath too. So And you look at, for example, our EV company, we're looking for a CEO who's out in the industry. So in addition to the times, Robin's time and people from group management, we do spend a lot of time building talents and I think that's why Robin is first time being able to manage all these businesses because a lot of it is on building that middle stream at Baidu for each of business groups so that they can learn more tonnage as Robin had mentioned, doing sentence and so forth. Thank you. And next question comes from Natalie Wu from Haitong International. Please ask your question. Hi. Thanks for taking my question and I wish you luck for starters, Chen, Jun, Robin, Chen and Jen. So my question is regarding the autonomous driving. So Apollo is absolute leader for the 3rd party service providers in that area, but just curious what are the closest competitors you can think of Regarding ASD, Robotaxi, smart city transportation projects, these three segments, respectively. We'd love to hear management's thoughts on that. Thank you. You mentioned the competitors from ASD Smart Transportation. What's the third one? SMAS. SMAS, the smart city transportation projects. Yes, sure. Yes, in terms of I think the main competitors come from the traditional Tier 1 companies. But like I mentioned, we have unique advantages. For example, HD Maps, basically, The non Chinese companies are not allowed to provide high definition maps. And for smart transportation There are a number of more traditional smart transportation Companies, domestically, their business model is more like selling the hardware and continue the project and go away with it. But our model is more system as well as enable autonomous driving and connecting roads with vehicles to give them more guidance on the loan information and help them to avoid Any kind of conjunction. So like I mentioned, there might be Some other vendors that could compete in this area, but when you really compare about the effecting of this kind of projects we have so much ahead. In terms of math, there are A number of startups that have trial projects in scattered But it's in such an early stage. I think the adoption, well, pretty much driven by the maturity of the technology. And since we are well ahead in terms our last question for today comes from Tian Hou from TH Capital. Please ask your question. Yes. Herman, Robin and Jun, okay. I have two quick 1 is related to your Apollo automatic driving. A lot of questions have been asked. So my question is very shorts. So on the one hand, all the modules you're selling to OEMs, on the other hand, you're going to start your own EV companies. So under what kind of circumstances some of your technology you're going to just keep to yourself instead of messaging to others. So that's number 1. Number 2, related to the AI call center solution, So I'm very happy to see that operators start to purchase. And I wonder what is the potential for the AI call center solution. Who can be the potential customers? And what industries this call center can apply to. So that's the 2 questions. Thank you. Yes. For the first question, Apollo is an open platform. All of our technology are available to our customers. We will work with them to our best knowledge and best efforts. So anything that we use for ourselves is available to 3rd party too. It's just because we have Better understanding of the technology itself, we can better integrate software If you can compare this with the windows and surface, right, surface a benchmark for laptops. That's pretty much like Apollo for 3rd party and for our On the AI solution for cost centers, it actually can be Industry, the financial services industry, wherever there's some customer service needs Our AI cost in the solution can be applied to it's actually being used in a number of different We are going through Phase I, Phase II, Phase III so that the experience continue to Improve and the knowledge base for that certain sector or for that certain company can be viewed and the system will become smarter and smarter. All right. Thank you. So ladies and gentlemen, with that, we conclude our conference for today. Thank you for participating. You may all disconnect.