China’s largest search engine Baidu is getting an offline revenue boost after it led a $300 million strategic round in Xinchao Media, a company that shows people ads when they’re waiting for an elevator — or stuck in one.
The tie-up will see the partners collaborate on data integration that knits reams of search data from Baidu with Xinchao’s offline data. Baidu also says it will “empower” Xinchao with its big data algorithms and artificial intelligence technology, which, in other words, could make elevator ads more relevant as Xinchao has now deciphered people’s online behavior.
Xinchao will also join Baidu’s expanding network of “screen” ads distributors that target audiences across cinemas, office buildings, smart TVs or the little display screen at one’s local supermarket.
The partnership appears to show promise, given that Baidu commands 80 percent of China’s search market, according to Q1 data from market research firm Analysys. Xinchao, on the other hand, claims to run ads in 700,000 elevators in more than 100 Chinese cities.
The funding comes on the heels of Alibaba’s hefty $2 billion investment into Focus Media, a main rival to Xinchao that claims to have a reach of 200 million middle-class consumers across 300 cities in China.
Like Baidu, Alibaba makes a big chunk of its revenues by charging marketing fees. Despite its pivot to an “AI-first” firm, which has given birth to projects from autonomous driving to smart speakers, Baidu still devises most of its revenues from search ads. In the third quarter, online marketing made up 80 percent of Baidu’s total revenues.
Though Alibaba and Baidu do not compete directly in their main business — e-commerce and search engines, respectively — they do grapple with each other for the advertising market. Baidu’s alliance with Xinchao could help it fend off Alibaba’s growing partnerships with brick-and-mortar retailers, a setup that could potentially expand the e-commerce firm’s advertising footprint.
As of 2017, Alibaba controlled 33 percent of China’s online advertising market, while Baidu trailed behind at 24 percent, according to Analysys. Tencent held a less significant share at 13 percent.