Google and Baidu are not direct competitors. Google has spread its tentacles in almost every part of the world except China. Baidu offers its products and services exclusively in the Chinese market. Their business models are pretty similar, and Baidu is often referred to as the “Google of China.” It appears that China’s Google is performing much better than the American Google in at least one area: the smart speaker market. That’s why our Baidu vs Google comparison will focus on smart speakers.
Research firm Canalys has published its latest report, which shows that Baidu has replaced Google to become the world’s second-largest vendor in the smart speaker market during the second quarter of 2019. Amazon remains the global leader with 6.6 million unit shipments and 25.4% market. Amazon’s Echo speakers registered an impressive 61.1% growth compared to the same period a year prior.
Baidu, which sells its smart speakers exclusively in the Chinese market, recorded a staggering 3700% growth in sales. It had sold merely 100,000 units in Q2, 2018, accounting for just 0.7% of worldwide sales. Just a year later, it sold 4.5 million smart speakers in Q2, 2019. It now commands 17.3% of the global smart speaker market.
In contrast, Google witnessed a 19.8% decline in sales during the same period. The company had sold 5.4 million speakers in Q2, 2018, representing 32.3% market share. It slipped to third place with 4.3 million unit shipments and 16.7% market share in the second quarter of this year. The overall market grew by 55.% to 26.1 million units. Google was followed by Alibaba with 15.8% and Xiaomi with 10.8% market share.
Now let’s check out why and how the Chinese search engine giant won the Baidu vs Google market share battle in smart speaker category.
The US smart speaker market is only about half in size compared to China, and has been struggling. The US market stood at just 6.1 million units, down 2.4% from the same quarter last year. In contrast, the shipment size in China doubled to 12.6 million units in the second quarter of 2019. That’s why Google and Amazon have been focusing on boosting their sales outside the US.
Canalys analyst Jason Low said in a statement that Google’s transition to the Nest branding as it pivots to smart displays “proved to be a challenge.” Google has started rolling out the Nest Hub smart displays outside the US, but Nest is not a strong brand in international markets. Google not only needs a “revamped non-display portfolio” in the US to spark consumer interest but also “a robust marketing strategy” to strengthen the Nest brand outside the US.
Anyway, Google is not facing a direct threat from Baidu. The Chinese company doesn’t sell its smart speakers outside China, and Google doesn’t sell its speakers in China. It’s still a big feat for Baidu to beat Google in terms of sales considering Google has access to 80% of the world’s population while Baidu’s total addressable market (TAM) is only Chinese population.
Baidu’s aggressive pricing strategy
Baidu’s smart speakers run the company’s DuerOS platform. Its first devices failed in the market. It entered the smart speaker market with the launch of Raven H, which was a premium device aimed at the high end of the market. It was priced at CNY 1,699 ($237).
Following the failure of Raven H, Baidu shifted its focus on low-cost models. Its Xiaodu speakers start at just CNY 89 ($12). It helped Baidu beat its domestic rival Alibaba during the first quarter of 2019. It reflects the dynamics of the Chinese smart speaker market.
Three of the world’s top five largest smart speaker vendors are Chinese – Alibaba and Xiaomi being the other two. At first, you might think that Baidu faces fierce competition in China. But Canalys analyst Cynthia Chen noted that Baidu faces “little competition” in the smart display category.
Baidu was the “key driver” of smart displays, and has achieved a 45% smart display product mix during the second quarter. It was able to build a “strong momentum” in China due to its aggressive marketing and go-to-market campaigns. The rapidly growing Chinese smart speaker market acted as a catalyst for the search engine giant.
Baidu CEO Robin Li has said that he was not worried about Google re-entering China. The US search engine giant exited China in 2010 due to local laws and heavy censorship. But recent reports suggest that it was developing a China-specific search engine that would comply with Beijing’s strict censorship. If it happens, we will see a Baidu vs Google fight in the world’s largest market.