Q4 2020 Baidu Inc Earnings Call

[music].

Hello, ladies and gentlemen, and thank you for standing by for Baidu, its fourth 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 and I'd like to turn the meeting over to your host for <unk>.

Today's conference.

Lynn Baidu director of Investor Relations.

Okay.

Hello, everyone and welcome to Baidu at fourth quarter, and full year 2020 conference call.

Baidu has earned through.

And you did earlier today and then he can find a copy on our website as well as them.

Well today, we have lovingly uncle founder and Chief Executive.

Chief Financial Officer, and Ocean excepted by.

Charge of search and feed.

After our prepared remarks, we will hold a Q&A session.

And that the discussion today will contain forward looking thing.

He didn't know to say public ratios of U S. Private Securities Litigation Reform Act, Nike and Nike quite.

Forward looking statements are subject to risks and uncertainties.

Actual results could differ materially from our current expectations and potential risks and uncertainties include but are not limited to those outlined in our public filings.

SEC, including our annual report on form 20-F, Baidu does not undertake any obligation to update any forward looking statements, except as required under applicable law our earnings press release and this call include discussions.

And unaudited non-GAAP financial measures.

We have made minor adjustments to GAAP.

And our retractor.

Yeah.

And secondly cause.

The Asia and noted that the non-GAAP measures to the unaudited most directly comparable GAAP measures and he is available on our IR website at IR day Duck Baidu Dot com as a reminder, these conflicts.

In addition, and webcast of this conference call will also be available on Baidu IR website, I will now turn the call over.

Okay.

Good morning, everyone Baidu delivered another solid quarter and Q4 and five.

And this quarter revenues reached RMB 23 point and one.

And the three 5 billion.

And.

Which is up 6% year over year and.

8%.

And from quarter.

And that is much higher than our historical flattish or low single digit growth from Q3 Q4.

In addition to the improvement.

And all the conditions in China.

And the savings from digitalization and gas.

And art.

And for non advertising revenue from the fourth quarter growth, 52% year over year, two and annualized run rate.

U S dollar.

Two six and driven by the conversion.

And I solution.

And services and consumer.

Such convergence.

Expected to accelerate into the next decade and Baidu stance.

At this time.

Let me elaborate on the trends that we're seeing.

Starting from March transportation.

China and to receive global competitiveness and the transport sector through aggressive infrastructure beauty.

And the Chinese government is promoting our multi year plan to install and Mark Transportation network.

He is.

And then camera on public roads connecting vehicles. So thank you and.

Net to foster tapered Robby and crew.

And throughput and reduce carbon emissions.

Such government initiative encourages municipal government to shift their budgets towards a more software defined.

And now.

Apollo strong brands and intelligent driving and our holistic approach to smart channel.

And the Asian makes us well suited to capture the opportunity and smart transportation and infrastructure development.

For example, Baidu sign a strategic partnership with Guangzhou, installs and China to deploy the world birth, multimodal autonomous driving mobility assets, sorry, wont map platform.

Utilizing a pall over all the testing and blah blah blah blah blah blah.

Great.

While we will begin this month to allow commuter and.

The Huangpu district to call up public transport services on demand and new Texas ride hailing and other traditional and gasoline powered public transport services.

And the Guangdong margin importation project.

And each of Baidu, leading Arnold Scribing technologies, and Baidu cloud strong technology infrastructure.

While leveraging the reach of Baidu, AEP, and Baidu maps to enable and local easy access to our puzzle net.

For enterprise and cloud, we have seen and customers.

Subscribing to Baidu cloud due to our strong Internet Foundation.

For example, a major E commerce company and existing and customer began using our cloud services a year ago.

In the past year.

And customer thought it's business growth two massive.

When the customer realize that Baidu AI cloud was able to support.

With over 100 million daily users and enable them to expand rapidly.

And our customer increased purchased off Baidu cloud services by 82 per Boe from a year ago.

Over time, we believe Baidu AI call stand to benefit from our existing advertiser base and.

<unk> stockpiles and enterprises.

Well our provider neutrality.

And.

And the face of enterprise customer adopting multi cloud provider strategy.

From this example, we see strategic advantage up concurrently operating in the AI solution cloud services and Internet market.

And the practice and the public sector embrace digital transformation.

Two strengthen and expand their relationship with their customer and constant do and online.

Absolutely enter the next day.

Okay.

<unk> is well positioned and stuff.

And the leading AI company with a strong Internet Foundation.

And to see the huge market opportunity and cloud services autonomous driving smart transportation and other AI powered area.

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Turning to Q4 operating highlights.

Let me start with AI cloud Baidu.

He will cloud continues to be number one in China AI public cloud market.

And the IGT ladies that reported.

Martin and the third time that Baidu has topped the list.

Baidu AI cloud offers a full suite of cloud services and solution and it's.

Differentiate it and the market with our use of AI to power cloud solution and improve our customer operational efficiency and service level.

Our AI solution, demonstrating scalability and replicable across multiple industry sectors.

Example, our AI cost interest pollution, which use at baidu brain to handle customer calls and the conversational AI is growing repeat purchases.

Our first the key customer a major telecom operator has.

Followed up with two more purchases of our AI call center, and install them and their customer service centers nationwide.

As we strive for customer satisfaction and best in class solution, Our AI call Center solution has.

Definitely expanded from telecom and other sector, including airline 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 one month.

And the area of vertical cloud the smart transportation project with Huangzhou serves as a lifestyle project for other states to follow.

And the deployment of Apollo math and I'll.

And the other two other robo taxi and blah blah blah.

And place us at the right or other.

Public transportation.

The implementation and B to add smart growth infrastructure equipped 102 intersection and the street and the knowledge stated district.

Well, Joe the cameras and sensors, enabling better traffic management.

Commercial vehicles and earnings of Infinity, installing durable after powered rear view mirror to enable traffic violation improvement, even if the license plate up of violating vehicle.

Covered by a month.

The Guangzhou project Apollo AC he transportation engine, which in essence is a transportation cloud solution.

Its processes and traffic information from Apollo math, and B to act duo and connected vehicles and Baidu maps.

And it provides and traffic agencies better information to improve traffic management and transportation services.

And it enables a total and other compatible vehicles better understanding.

And the ramping traffic condition.

Similarly, we recently signed a second contract with the city.

And to expand coverage, although smart transportation and their sales.

Our strategic partnership with Beijing, Guangzhou, and Shanghai, and <unk> to name a few to provide smart transportation is becoming an important milestone and means that development more than C zone.

Being at the mean for the public sector and to use AI to improve metropolitan traffic public transportation and air quality.

Turning to intelligent driving and we're continuing to invest aggressively in South Dakota, and technology for passenger vehicles and Robo taxi fleet management.

A poll.

Once again.

And that's the number one in China for autonomous driving according to the 'twenty and 'twenty <unk> autonomous vehicles growth test to report.

The report is highly respected in the industry facing traffic authority and closely monitor autonomous driving test model.

Apollo accumulated test miles reached $4 and screen Malian aimed December Apollo has been granted China first driverless testing and permanent and it's the only <unk>.

Chinese company to be blended driver testing permit from both California and China.

In terms of autonomous driving operational experience.

Total robo taxi and Bubba box fleet has provided over 210000 lives to the public as of December 2020.

We are proud that door OLED for auto are operating system power and auto infotainment.

He has been installed in over 1 million new vehicles just to last year.

And two to market trends.

And what mobile home and in vehicle Internet.

And we converted baidu with the Internet and platform designed to drive synergy across usage platform and any.

Bulk door OLED for auto to elaborate just a large developer community for Baidu Smart mini program.

To populate skill score and.

And the same time.

Consumers benefit from the consistency and from minority of door with Dubai from mobile and home a moment.

Two.

And you are buyer turning to best in class top gun and capability. So that they can do more and enjoy their rights and cars.

The roof toward building new vehicles.

Better self driving capabilities through AI and create.

It's a big opportunity for Baidu.

Let me talk about the progress.

And so self driving or ASC, which includes HD maps ABP and AFP.

To date, we have signed strategic partnership with and leading automaker to power their new vehicle model.

Paulo self driving services.

Baidu is uniquely positioned to offer high definition map, our HD map a critical component for self driving to automakers in China. We have invested in Baidu maps for many years and are one of the very few companies and China offering HD map.

Yes.

Last mile and Wm motor and leading Chinese EBIT maker and.

Net production of the new W.

B.

Due to release and the first half of this year.

With Apollo automated valet parking or ADP.

Several poor service option.

We are excited to announce that when he will be taking older Apollo autonomous navigation pilots or A&P, which is based on a follow up meeting autonomous driving technology.

This comes timely and I'm on it.

China type a or agency released the draft deregulation to allow high we'd have been autonomous drive.

We believe and to and integration of hardware and software while it makes the best vehicle. That's why we are in the process of setting up and intelligence EBIT company and we have entered into a strategic partnership.

Multinational automaker shutdowns, Judy holding group to offer.

And mobile design and manufacturing for Baidu, New EBIT company.

Judy hope that distinction.

That spending and Chinese automobile brands in past years.

Under the Volvo and Gd brand.

By combining baidu.

Expertise in autonomous driving and smart transportation with Judy expertise.

A leading automobile and EBIT manufacturer and we hope to pave the way for the future passenger vehicles.

Turning to endure a lap.

<unk> continued to see strong adoption, mostly wife queries from third party devices reached $3 6 billion, that's up 66% year over year.

And <unk> skills store now offer.

Over 44 and with scale.

And our focus on user skin, leading AI capabilities estimate channel marketplace number one and global shipments I guess.

According to all free market research firm.

He strategy analytics and canola.

Sure.

The third quarter of 2020.

Turning to mobile ecosystem, Inc.

In December and EU Baidu App reached 544 million the number of upgrader.

By GAAP Hot and nearly tripled the total number of smart mini program growth.

124% from a year ago.

The Mou.

Marketing and he program reached 414 minutes.

And this number one and two ascribing Internet platform that is attracting a lot of a number of third party creator publisher and service provider.

The same trend can be seen in our vertical and community effort.

For example.

Quarter over quarter basis, and daily average.

Our shape of video and.

Baidu health growth, 92% and daily average liability with session hosted by healthcare professional growth 163 per se.

Yes.

E Commerce conscious that lives up $1 one.

Bill and Internet users each month in China.

Through our AI building blocks, we enable users to have single log on and meaning that a user can block into our app to check with our express delivery status of summit and express delivery and pickup just by searching and clicking the applicable delivery companies and surgery.

The service and convenience are anti building block enabled daily Express delivery service usage to surpass 4 million times, just a month after going live in Baidu App.

The vibrancy of our mobile ecosystem allow third party services to quickly ramp up and our search nature support the survival long tail services.

And daily login users on Baidu, App surpassed 70% up 18 points from a year ago, which creates a strong foundation for further growth of third party services and non and I'd be offering on baidu.

And monetization for.

For the fourth quarter revenue or manage the page reached a third of Baidu core online marketing revenue.

And from less than 24% a year ago.

Over 300000 managed page customers have adopted Baidu marketing cloud, which enables them to purchase marketing services.

Audience and January and.

And maintain lifetime relationships with consumers through the tools and services offered on our hosted platform.

Our marketing cloud.

Right.

CRM like services or.

For example, allowing merchants to message customers.

Who have previously interacted with them.

So such CRM feature facility re targeting and other measures to improve overall marketing effectiveness.

We aim to integrate YY onto our platform in a deep and thorough way.

Comparing with other large mobile ecosystem, our non advertising revenue represented a much smaller percentage, which means there.

Huge potential for upside.

The <unk> acquisition will help speed up the divestment of our non AD revenue, we will allow YY broadcasters to increase their fan following on Baidu.

Hundreds of millions of Baidu user, while being able to enjoy more live streaming content through baidu, app and how kind of short video and Baidu products.

We believe such large scale product integration and well create significant synergy and content infrastructure and monetization.

We also plan to leverage YY to accelerated the divestments up information and knowledge and created like trading and Baidu.

This effort will not only improve user stickiness and.

And vibrancy.

Large internet platform, we believe last screening has the potential to evolve beyond hosted and to become a major way for community.

On Baidu to further and goodbye and margin to increase the user engagement and growth there social assets on the Baidu platform.

User attention you already shift toward.

And interactive content basically the advent of <unk> and.

And augmented reality.

Okay.

Two increased video.

And lastly, well be and integral components of future content development and we are excited about this opportunity.

With that let me turn the call over to Herman to go through financial assets.

Thank you Robin and Hello, everyone and welcome to Baidu and fourth quarter 2020 call all monetary amounts used and liked.

Definitely and then and be less.

Day to otherwise despite.

Despite an unprecedented year a bit.

And this has returned to growth and a profit was solid in the fourth quarter Baidu as the online marketing, it's widely diversified covering many industries and the Chinese economy, and we are benefiting from a rebound of the Chinese economy concur.

Concurrently our non advertising revenue is growing rapidly, especially for the new AI business.

Non advertising revenue was up 52% and the fourth quarter, reaching 18% of Baidu core revenue.

We recently conducted a Tam.

We recently conducted a Cam 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 a ton and it's driving with 10 times the size of our online marketing channel and expect the CAGR to 'twenty and 'twenty five is three times that of our online.

And the potential for our non advertising business is quite significant for example, we recently signed a smart transportation project, whose contract come out with more than half a quarter's worth of auto online marketing and revenue.

There are over 100 cities in China with a population of over $1 million. When you consider a robust project recently experiment and collecting twenty-five renminbi per each right. It's fair collection, because feasible, we could see an increase and robot taxi demand, which could drive our mass revenue under transportation cloud the service component of fleet management.

For fiscal 'twenty, and 'twenty Baidu core revenue reached $12 1 billion and U S dollars and we spent 21 per cent of research and development.

Which is a testament to our commitment to technology, especially in the area of research and a consistent heavy investment and technology has made baidu pedal pedal the number two deep learning framework and the world Baidu.

Baidu open AI platform, the largest developer community of its client among Chinese companies and our AI patent portfolio with the largest and China.

Our investment and AI runs the gamut of technology developer communities IP patents, Yeah, chip design and talent as.

As we began to commercialize AI at scale the incremental revenue that we do buy it will be reinvested and two product development sales and project delivery and to further accelerate AI commercialization and strength in our moat and our.

And I business.

Unlike to see business to be and two Qi will require that we hire developers sales and engineering.

Delivery personnel, a few quarters ahead before they start contributing to revenue.

At the same time as our solutions become more widely adopted and we develop more toolkits margins usually improve.

And we shall also gained synergy coming from multiple businesses scaling while leveraging off of Baidu brain, our core AI engine.

We are excited about our non advertising opportunities when cloud services to smart transportation to intelligent driving.

Which includes self driving services intelligent he b's robo taxi fleet management as well as non advertising upsides and more.

<unk> ecosystem.

Turning to financial highlights total.

Total revenue for the fourth quarter reached $30 3 billion.

One 6 billion U S dollars, increasing 5% year over year.

And our business improved mainly from Baidu core, which was up 6% year over year in the fourth quarter to 23 per 1 billion or 5 billion U S dollar compared to down 13% down 3% and up 2%.

But Q1, Q2 and Q3, respectively.

And I'll give you more color on each.

Each component Baidu court.

Our AI cloud grew 67 per cent year over year, reaching 2 billion on annualized basis.

Our growth benefited from enterprise customers coming from the Internet media business financial services transportation and health care sectors.

Intelligent driving and OTI revenue is also growing but it's near term contribution may not be as apparent.

Paul a self driving what we call at ASD services, our book on a multiyear basis and we recognize revenue when the automakers new vehicles are shipped with the installation of our ASD and services.

We have signed strategic partnership with 10, leading automakers for ASD and we're taking what is autonomous navigation pilot or A&P.

Our mobile ecosystem many of our AD verticals are growing including health care education.

Internet retail real estate home furnishing and auto.

And that advertising the majority of Baidu core AD revenue continued to see double digit growth benefiting from the growth of search queries and C. P M.

AD revenue is partially offset by Baidu and yet we are prioritizing profitability over revenue growth.

Net revenue reached $7 5 billion.

Down one percentage year over year, <unk> subscribers reached $101 7 million and December.

Further strengthening its foundation to produce entertainment blockbuster originals.

Non-GAAP operating income for Baidu and Baidu core.

It was $7 1 billion and 8 billion or $1 2 billion U S dollars respectively non.

Non-GAAP operating profit was down 5%.

And for Baidu core and non-GAAP operating margin for Baidu core.

Was <unk> 35 per cent crossover.

Cost of revenue was four point.

And $14 5 billion down 6% year over year, primarily due to the decrease and content cost and traffic acquisition costs bandwidth costs and amortization and impairment of intangible assets, partially offset by an increase and cost of goods sold SG&A and R&D together with $10 5 billion up 24% year over year.

Primarily due to an increase and promotional and R&D personnel related expenses.

Adjusted EBITDA for Baidu and for Baidu core were $8 6 billion and $9 4 billion from.

$1 4 billion U S dollars respectively.

Cash and short term investments with Baidu and Baidu core at the end of your $162 9 billion and $148 6 billion or $22 $8 billion U S respectively.

Free cash flow per Baidu and.

Excluding <unk> were $3 8 billion and $5 4 billion.

$827 million respectively.

Baidu core had approximately 3200 32008 hundred and full time employees as of December 31st up 14% from last year during.

During the fourth quarter, we returned 600 million to shareholders.

And the cumulative share repurchase in 2020 to $1 9 billion U S dollars compared to $709 million in 2019.

Okay.

Turning to first quarter guidance.

For the first quarter and one baidu expects revenue to be between 26 billion and $28 5 billion renminbi, 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 potential contribution from the acquisition.

And why wildfire and.

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 fourth quarter results.

We have made significant strides and preparing baidu for the next legs of growth our heavy investment and 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.

And services intelligent electrical vehicles and autonomy driving.

The cash for our non advertising business before.

And before including autonomous driving and it's about 10 X stirred up our online marketing business and the CAGR three X faster.

We get a glimpse of the impact of these opportunities with Q4, non advertising revenues growing 52% and already reaching 18 per cent of our core revenues.

We view Baidu Core's business and three revenue growth curves mobile ecosystem, AI cloud intelligent driving and OTI with non advertising value added services and AI cloud to Bruce our near term revenue growth and with intelligent driving and other growth initiatives to boost revenue growth further out.

Over the past quarters, we discussed the aggregation services on Baidu platform.

Acknowledging convergence trend.

Net Robin talked about will allow baidu families of apps to be equipped with unique services offer from us working directly with enterprises and the public sector. Robin gave an example, and the smart transportation sector. We have also seen this trend and the health sector.

We are working with hospitals to provide their services and doctors and greater Internet presence, some causes and industrial Internet, where there is a deep integration with enterprises and the public sector of each industry and provide them with a turnkey solution to internet presence, our strength and building technology infrastructure puts us at and.

Advantage and the Internet environment, where synergy is generated from our offering of cloud other grocery and Andrews and mobile ecosystem concurrently.

And mobile ecosystem as benefiting from a rebound in the Chinese economy, and we stand to benefit from leveraging our large user base to grow and non advertising revenue such as fully integrating YY onto baidu platform.

On capital allocation, our share repurchases in 2020, total $1 9 billion and U S dollars, which reflects our conviction that we have and the direction of our business.

Over the past two decades, we have demonstrated a track record for long term growth and strong profitability.

The heavy investment that we're making to seize growth potential puts us on a path to further improve our long term growth.

Let me and by talking about our efforts and ESG we were.

Recently released four series of ESG report clarify our policy and anti corruption non discrimination privacy protection data security talent empowerment and low carbon.

And mission commitment.

More importantly, baidu is absolutely an autonomous driving including empowering he BS and robo taxi as well as smart transportation decreased carbon dependency and able to improvement of traffic congestion and air quality do AI and cloud services supporting Green energy and Green environment. We are pleased that Baidu ESG ranking.

<unk> 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 session.

If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press the pound or hash key participants are requested to restrict to one question at each time.

Your first question comes from and line of Alicia Yap from Citigroup. Please ask your question.

Hi, good morning, and good.

Good morning, Robin Herman and Sharon I see net huh.

My questions is related to your partnership with Geely and can you share with us some colors on the expected timeline for these new EV to be released and what I do wonder to achieve out of it and we'll.

He will Baidu also continue to seek for partnership with auto OEM to co produce EV.

And you know.

Just related to that is it seems like G. D. He is also working with multiple.

Companies and also working on developing that on a dos. So how would you describe the partnership and your relationship with Judy. Thank you.

And hi, Alicia this is robin.

Let me answer your question our partnership with Gd It.

And styles that are that he.

And that our end to end integration hardware and software will provide the best experience for autonomous driving or lost smart EV and in the past we had a lot about sun.

On a very advanced.

Autonomous driving technologies, we try to push this to.

Integrate into our.

Our OEM customers, but most of the traditional Oems tend.

Tend to wait on to someone else adopts the newest and ladies.

Technology.

That's why and when we decide it's time for us to just debuted.

Mark a vehicle to show that to how good the experience is.

And it also serves the purpose of better and faster and stronger feedback loop. So that we can improve our self driving technology a faster right now.

Debenture is progressing very well, we have a seal on board and we have decided that the brand after the new vehicle as you know he can take you really takes off around three years from that.

And the beginning to the launch of a new EV model and.

We try to and.

And do the same for for this new venture.

Uh huh.

On the other hand Apollo and.

Baidu brain.

Channel remains to be out there and open platform. We will continue to work with other Oems to provide the technology.

And the products and two of them whenever that is he need either.

We well.

Serve them to our best efforts and up.

And in the past just to.

Without someone.

First trying they tend to wait and now we have a flagship why and we have thought.

We have.

Benchmark.

And they can bottle.

And I'm sure. It will also help.

Net.

Revenue all Fob.

All of the Apollo.

Technology provide a part.

Autonomous driving.

Great. Thank you. Our next question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Hi, Good morning, guys just.

I have a follow up question on AI.

Wow.

I remember one of the key seasons behind AI call is Bob <unk>.

Sure.

Margin than some of your competitors, which are focused on some of the more infrastructure cloud services.

Wondering if.

If you can offer some not necessarily offer quantitative guidance, but from a margin outlook for your AI cloud pieces like given.

Some of your competitors are already achieving breakeven status. Thank you.

Yes.

Behavior and this is from and I'll take that.

So while we have several pieces of our business and our cloud we talked about R. R.

Enterprise cloud, which is.

As but we differentiate and the market, which it with AI solutions, such as Paas and SaaS and clearly.

We're able to do pass and SaaS, we see there as much.

More profitability to be made or assets.

But what we have to recognize is that when you're going into a second software space of patent assets. Initially it might not be very profitable with couple of the AI solution that Robin talked about when we did our first solution a couple of years ago.

And actually.

Very very poor margin, because you're going into a new environment you might have a good product, where you've got a and a lot of.

Our efforts to integrate with their existing legacy systems. So as you build that out as you're selling to more customers and so forth and make your Arctic and more standardized and the next few versions of this allows your profit margin to increase so because we're growing.

Fast there and we're trying a lot and the product we would not expect profit margin at this stage.

Very comparable.

When we look at our product lifecycle, and such a day 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 on the one part.

And on enterprise cloud and so forth.

When our margin and it's gonna be a function of how much and passed and how much is.

Pass at that and how much is the App I think adds overtime because with differentiated with.

And Pat overtime, with and that proportion score big and bigger I think are profitable would be better, especially when products are matures and then another big part of our cloud is for example, a vertical cloud such as smart transportation and again that principal.

Product maturity, but that principle.

Except 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 popular and so forth, but I think it really depends on the business day, you Wanna be it and unfortunately, we don't have the luxury of some of our peers.

Here's where they can just allocate expenses by two of the other businesses and so forth because the infrastructure and sustained so I think profitably I think one is how you do allocation expenses. Another is are you focused more and software do you have a differentiation and software sector, especially Asia, our AI solutions and the hub matured quite a bit.

And over the product lifecycle and I think these are determinations of future profitability.

Yes.

Thank you and next question comes from the line of Piyush <unk> from Goldman Sachs. Please ask your question.

Thank you for taking my question and congratulations Robin Robin for splendid quarter, a great option and.

And can I just go back to the intelligent he be company that you talked about Robin and he talked about a three day lead time to get a car to market under the name and so you selected a name and let's call. It Baidu call for the time being why would it take free is for that to happen first and second when you launch that car and.

And I'm just trying to Fisher also what segments are you targeting and are you targeting.

And the market share and this explosively growing market.

And trying to and we're trying to get a better sense of how this will evolve with time and why this is happening what happens to the revenue lines as we start to see your crude from the.

And the A&P and particular, so if you could give us a sense of what price it could be like.

Products like the A&P, but it's just gone and I suspect live right now.

And I'll stop there.

Hi, Piyush.

Yeah.

As I mentioned is that the.

The reason we're doing that.

Martin.

And that we want and frame the best.

Our technology too.

To the market so the selling points that may.

And then after.

And you.

And car model will be more on the software side or the software and hardware and integration so that and Pat.

Better.

And to the driving capability as well as better infotainment and because of do overlap for auto et cetera et cetera.

We will announce that.

Our price range or demographic target when we think it's a.

It's mature enough.

Well, we are really ready.

For that but.

But.

That means that you can 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.

And well be the best car on the market the better.

Accounts, driving technology and better infotainment.

And for the commodity car people generally call.

He.

But for us to grow.

<unk>.

And it's not electric the real point.

Talent and weight best day in terms of flow.

Intelligent and driving and we will fully leverage this kind of flow.

Kind of a capability and.

Yes and.

Let me elaborate a huge went went just to go a little bit cheap, but give you more color on the meaning of intelligence. So when you look at it. He vs. Right. There are several components for example, ASB a Paul self driving and services that we talked about that would be <unk>.

T maps that would be valet parking that would be.

Navigation pilots and stuff like that right and and our model is different and most of EV manufacturers, where we license Oems right. So so we can spend that R&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 one number two.

And in addition.

And 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 our content.

So the west for auto as we mentioned and.

And what we've already.

And then installed were over 1 million cars 2020, and again, that's the model we're working with several Oems. So we had the edge and these two areas. In addition, we're doing autonomous driving and so we can leverage that technology and more importantly, you got to realize we're doing this on and ecosystem basis. So on the one hand is making the car more.

And.

And what form ASD from connected vehicles.

But from a tonnage driving another is the fact that we're doing <unk> with start transportation, because a lot of the PK data and <unk>.

Gather on our.

Transportation.

Cloud.

There is on the ROE, whether it's through the maps or whether it's connected vehicles and so forth.

And understand that ROE better so all of that data and that capability within and power.

So two things number one is we think our EBIT can be more intelligent because we're doing other components and because R&D is a centralized and it supports other manufacturers and secondly, because of our ecosystem strategy, where we're coming up on patient.

Patient angle and also from the different components of it.

Alright. 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 transportation side can you guys maybe.

The framework on the government's plan and it's a building all across the country should we think about that build out being maybe top 30 markets and also maybe help us understand the bidding process flow city contract a little bit do they choose from multiple vendors and tech standards to do testing.

And what he showed a key advantage compared to other operating systems.

Is it.

And so economy, driven miles or your ability to offer multiple services on the platform and also lastly, maybe Herman you can address this can you talk about the level of investments that is needed.

To make for smart transportation and also for autonomous driving over next few years and would you be breaking out the core advertising margin separately. So we can also see the organic growth sorry for along with the question.

Hi, James.

And in terms of smart transportation, we are are.

We are the pioneer of the AACE concept, which means that we.

We are the first.

Company to really consider transportation.

As a whole.

Using a more software centric.

Solutions to improve the throughput.

Throughput to connect to the growth, but vehicles and to help reduce.

Accident and.

Reduce and carbon emission.

Yes, when will he be when we talk to the potential customers.

And all kinds of different tier.

Tier cities, they will obviously compare and invite.

And by multiple vendors to pit those kind of projects, but I E.

Most all cases, we are.

So much ahead of any competition.

Essentially.

If they care more about the effectiveness of those and smart transportation projects.

And we want and so with so much I had because.

Total.

Our system is very open and we've invested in.

And this area for many many years and our AI capability.

And it.

Provides a solid foundation and we have being Hum.

And doing a lot of customization for smart transportation and that stuff from Ed mentioned previously initially that the margin could be low, but when we repeat this kind of projects and steady after city.

And the margin improved and the overall class margin for Smart city.

Smart transportation projects.

Keep improving.

It's a much better than the past and CDN business also.

A lot of cloud services.

Our investment.

Yeah.

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 a smart spar transformation is part of our cloud.

Cloud.

And so.

So what youre seeing is already built in there and you mentioned, whether it's our margin look like for our core business.

Oppose youre asking for mobile ecosystem, so from mobile ecosystem.

Our margin.

And that on a non-GAAP basis, usually is between mid <unk> to high Forty's.

And we've been pretty consistent over the last couple of years, sometimes one.

And when you know revenue and a higher quarter, we might reach a little 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 free curve.

Growth mobile ecosystem will try to maintain within that range and then.

And for our new business, and so forth and look at it.

Because that is more about how we fund right and to optimize growth for index a couple of years.

Yeah.

Thank you. Our next question comes from Jerry Liu from UBS. Please ask your question.

Hi, Thanks management and happy new year.

So my question.

First is just to go back to the.

Revenue guidance for the first quarter are definitely a bit stronger than and 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 it's related to cloud and smart transportation I'm wondering if there's any other key key growth areas and then secondarily and the core advertising business do we chalk this up to improving macro or are there some maybe.

And the different dynamics in terms of competition or.

Alex Thank you.

Yeah, let me answer it and <unk>.

And our components.

We talked about how our non advertising Isabela, Santa Barbara revenue and in Q4, it's very growing robustly, a 52% we expect our non advertising to continue to.

Our growth our overall baidu, so, meaning it's going to because a lot of these are new businesses and it's gonna be a be able to pull their weight smart transportation and as part of cloud and we talked about is over a 67% growth in Q4, So I think that.

Our strong operating and so forth I expect this to continue into 'twenty and 'twenty, one, but do recognize that there is seasonality for example, when you think about.

Icloud and Q4 tends to be stronger than Q1, but just so how the budget looks and so forth, but overall I think non advertising is going to be driving us and the only and cloud for example, and our other growth initiatives such as our <unk> and so forth. We think that these are all going to be engines of growth.

<unk> talked about earlier about.

Uh huh.

And Paulo 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 <unk>.

Advertising and business I think several things I think number one is the economy is coming back so the macro help certainly but more importantly is baidu a P. P. We talked about in App services several times already because we've seen and user behavior switching from browser into in App services, because we have a building block.

We're the only one at this scale and China, where the App was designed as a search app and it's open and allows worldwide web search and allows content from all different apps and from all different website because of that and because the content and services.

Our platform, making the close looped native app experience.

We think in China that day.

And I building blocks provides we think that that.

Helps user behavior and.

Because of you know credit.

Credit growth and so forth that helps drive our revenue and then also because its native app.

And the platform obviously CPM helps so you have traffic growth you have CPM and then also you have the backhaul.

As a backdrop healthy.

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 and Robin I think you mentioned that you guys plan to.

Start integrating YY appear.

Appreciate into your own content ecosystem in the coming quarters in your prepared remark our.

Can I confirm that that is due going a hat with the previously announced.

And despite all of the money would've reported and a changing regulatory environment from live broadcasting business in China, and then I think and you also mentioned.

New business opportunities that will gradually unfold as you guys integrate to YY live streaming operation capability into your content ecosystem can you talk us through from both the Qi.

Key addressable market and the business model that will potentially and foods with the integration process and lastly, perhaps Herman can you talk about how should we think about the financial impact.

Coming quarters, as you guys consolidated business and integrate the operations into your content ecosystem. Thank you very much.

Alex plenty.

First answers a bit model questions and.

And the Herman to answer the regulatory.

And our financial guidance.

Question.

In terms of this model, we basically view live streaming as yet another new form of <unk>.

Content and ortho Nufarm awful.

Monetization.

And for content live streaming.

Comparable to text images and videos, including long and short form videos.

Lifestyle, and it's just a new form of media.

Surf.

Users fast when you combine all kinds of different and media forms and provide that.

Platform off media whenever necessary and why and why apparently.

Right Okay.

Gary vibrant and and also mature.

Ecosystem or lapsed training contents.

And although they are more and.

Sure based content.

But the capability can be.

<unk> transformed into other form off last year's last trading income.

Non H R E commerce related.

Laughs dreaming and in terms of or.

In terms of monetization, we view the baidu platform as a whole our mobile ecosystem with Angelus millions of users log onto our platform on a daily basis, and we are increasingly provide.

More on native App experience and Subaru.

Super majority of users.

Lofty.

So that we know.

They are and and.

They can have a better.

Experience going from here.

Two zero right now that the large user base is primarily.

Primarily.

Monetized through advertising.

And sort of.

Hum.

And you all when you compare.

With other large.

A large mobile ecosystems are.

They typically hospital, you know more than 50% of your bromine coming from non advertising and.

For Baidu and <unk>.

And to our advertising or online marketing, we can monetize our user base.

Through live streaming through subscription through E commerce.

And many other form of and <unk>.

Revenue stream.

What's the rationale.

And behind the Huawei acquisition.

Hey, Alex can you help me with that question on muddy water reported again.

I think here the whole team.

Yeah.

I just wanted to clarify the transactions do you going behind that despite of the.

Underwater report and a changing regulatory environment and also the D is that do you see going ahead with the previously announced the valuation.

Yeah.

Yeah. So you asked quite a mix of our questions with regards to the muddy water reported I think a.

Joy has come out with a statement as you guys know they have a higher a global legal team and they also hired a big four auditor and and they have made their own.

And that's a joy announcement not a baidu announcement, so I think looking at that would be the best.

And with regards to our regulatory environment, we are cognizant of the situation and.

And that's why we think that and wanted to navigate as you as you know you have a lot of experience looking at this as you know whenever there is a regulatory.

Environment that you have to steer towards its more important to have a bigger a leading player in China, who have good relationship with government and who knows how to do things correctly and so forth and.

And we need it and experienced team and that gives us a better reason if we if we're going into our live streaming and we will file a large experienced team. So this is more of a acquisition of a team that did and that particular product.

Just just a business. It's the team talent is very important.

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.

No.

We're currently dealing addressing with some conditions and procedures.

And we are still on pace to do the closing as we announced previously we're moving ahead with this and.

Their revenue is usually between 2 billion and two 5 billion and a quarter. So when we can confirm.

All of this thing that we think we will.

To be able to come back with that.

Revenue amount and with regards to pricing and so forth.

Our final agreement with the original place, we do have a stipulation and agreement to protect our Baidu shareholders. As you mentioned they would do it with somebody water reported.

The big four of 2016 came in and did not see anything to global Tony came and did I see anything but to protect us we do have indemnification in there.

To get a recovery just in case, something blows up and our head.

As a result.

Situations and so forth.

So.

Did I answer your questions.

Well, thank you very much.

Thank you all.

Thank you. Your next question comes from Gregory Zhao from Barclays. Please go ahead.

Uh-huh Mangum and Samsung, taking my question and happy Chinese new year.

So we know now baidu have several different business lines cloud autonomous driving and mobile smart devices.

Susan TD operation catch lunch and know how the management team how do we piece of our time span and App.

First among all the different segments and and what's your current day.

Priority and.

Quick follow up on your <unk> six times and you mentioned the partnership we are meeting our automakers, who he in futures and what's your.

And that's the gas you made how did pricing are often free time, reducing cause he existing products.

Hi, Chad and attachments.

Okay.

He is a good.

Good day benchmark for pricing. Thank you.

Yeah.

Correct and in terms of Uh huh.

And time management.

I would say roughly half and half off.

Our time and resources and investing.

The mobile ecosystem par and the yards have and.

The Ah <unk>.

Cloud and.

Intel and driving.

And.

Other growth areas.

Because.

It's a relatively diversified portfolio and as well.

Try to set up.

A more flexible.

Mechanism of <unk>.

Or are <unk>.

Incentive structures and those that are there.

The team can be more independent and driven and for example, the.

The smart EV company, we have a strategic partnership with.

Uh huh.

They are separate incentive structure for for the team and we recently raised.

Money for our smart device.

Company.

Going forward, we will continue to do with us.

He.

Hum.

On the.

Apollo smart driving.

Service desktop.

We will continue.

Continue to provide technology and.

And a very open and flexible.

Manner.

I talked about we offer.

HD maps, we offer AVP Li.

Offer A&P and potentially weekly offer.

And other combinations off this kind of.

Technology and services.

That pricing.

Range could differ based on.

That.

Period of the contract and products, we offer and it's growing very quickly and so I'd say, it's still evolving very.

Very quickly.

Yeah, and let me.

And just add a little a Greg I think Robin was very modest with regards to.

Answering your telling question.

Robin talked about how he spent his time, but more importantly, as you may know over the last two years, we have significantly strengthened our bench strength. So when you look at for example, and the lead of our mobile ecosystem do you know he.

He's a Phd and we not only have a ugly.

And from from.

They are young joining us six seven years ago and also if you look at over the last 12 months we've been.

And I simply hiring good talents and then.

So if you look at Dr. While again, he's a Phd and we have been helping him bill his team and the two so and you look at for example, our E. D Company, we're looking for a E C.

And the industry. So in addition to the times Robin and timing and people from our group management, we do spend a lot of time ability and talent and I think that's why robin.

First the tie and be able to manage all of these businesses because a lot of it's on building that that middle stream and.

And at Baidu, what he showed the business groups. So that they can have more of a ton and stuff.

Robin had mentioned.

And it's and so forth.

Thank you and next question comes from Natalie Lu from High total International Please ask your question.

Hi.

And my taking my question and I wish you much status change and yeah, Robin Herman and Sharon. So my question is regarding the ophthalmic outside So Paulo is absolute Li.

Therefore, the third party service provider and in that and yet, but just curious.

What I'll call a culture.

And then you can from Clos regarding AFB Robo taxi loss city transportation projects.

And then secondly, respectively, we'd love to hear management's thoughts on that thank you.

Hum.

You mentioned the competitors from a S D smart transportation and what's the third one.

Okay.

And it's nothing and transportation projects.

Sure.

Yes in terms of FTE.

I think that the main competitors come from the traditional tier one.

Companies like.

Like I mentioned, we have unique advantages for example, HD maps so basically.

Uh huh.

Non Chinese companies are not allowed to.

To provide a high definition maps and four core smart transportation.

And projects are there a number of more traditional smart transportation companies.

Companies are.

Domestically are they the Europe, and small, though it's more likely and selling the.

Hardware and complete the project and go away a visit but our our model. It's more like a operating model, we continue to to optimize the throughput and reduce that and <unk>.

Traffic jams and improved 50.

For the the overall and transportation system as well as enable autonomous driving and connect.

Connecting dealt with vehicles to give them more guidance.

There's no information and.

Hum them too.

Avoid any kind of thought.

Jackson so.

Like I mentioned.

There might be some other windows and that could compete.

Compete English areas, but when you really compare about the and <unk>.

And the office kind of our projects we are so much a hat and.

In terms of mass.

Yeah, a number of.

Start off that.

Ah trial and projects.

And scattered cities, but it.

It is seen such an early stage.

I think the adoption.

And well pretty much driven by the maturity and off the technology and we are well ahead in terms of technology.

Technology development.

I think.

We are only limited by our capability.

And penetrating the steadiest and improving the technology itself and not really limited.

And any competitors.

Yes.

Yeah.

Thank you our last question for today comes from Tien Ho from Th capital. Please ask your question.

Yeah, Herman Robin and Sharon John Oh.

Okay I have two quick questions one related to your upon the autonomous driving and lots of question and half the ash.

Sure.

And on one hand, you now own.

Molecules you are sending to Oh, yeah.

And they hand yoga.

Wow.

And you'd be come from.

So I wonder what kind of a circumstance some of your technology, you're going to just keep it yourself. He set up that you know a messaging.

And two others. So that's number one and two related to the AI call Center solution. So I am very happy to see that operator, and the stock share purchase and I Wonder what is the potential for the AI call Center solution.

And can be the potential customers and whats industries. This call center can apply to so that's the two questions. Thank you.

Yeah for the first question our polo is an open platform all of our technology.

Available to our customers.

Customers, we will work with them to our best of our knowledge and best efforts.

So and it seems that we use for ourselves it's available to third party too it's just.

The cost.

We have a better understanding of the technology itself, we can better integrate software hardware and and.

Use the feedback loops.

And our more timely.

And so that we can improve our technology a faster.

If you can compare this with the windows and surface right.

Surface tariff that Sun.

Hum.

Benchmark floor.

For laptops.

Yeah.

Yes.

Pretty much like the Apollo for third party and for our.

On EV.

Our AI solution for cost centers.

It actually can be used and a lot of interest rates I mentioned.

The airline industry, and the telecom industry and the financial services industry wherever Theyre Sun and.

Customer service needs.

And that that our AI and our costs.

And this solution can be.

Applied to.

It's actually being used to and a number of different industries and we.

We are going to stay flat and face to face rates, though that the <unk>.

Earnings continue to improve.

<unk> and the knowledge base for that certain sector or for that sort of and company can be viewed.

And the.

The system and lumpy times smarter and smarter.

Alright. Thank you so ladies and gentlemen, with that we conclude our conference for today. Thank you for participating you may all disconnect.

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And.

Hello, ladies and gentlemen, and thank you for standing by for Baidu as fourth 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.

You have any objections you may disconnect at this time and I'd like to turn the meeting over to your host for today's conference John.

And then I <unk> director of Investor Relations.

Okay.

Hello, everyone and welcome to Baidu fourth quarter, and full year 2020 conference call.

Baidu has earnings release and you did earlier today and he can find a copy on our website as well.

Well today, we have not only our co founder and Chief Executive.

Chief Financial Officer, and Ocean Scepter.

Of search and feed.

After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward looking statements and other.

The safe Harbor provisions of the private Securities Litigation Reform Act like and Nike path.

Forward looking statements are subject to risks and uncertainties.

Actual results could differ materially from our current expectations potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC, including our annual report on form 20-F, Baidu does not undertake any obligation to update any forward looking statement, except as required by law.

Our earnings press release and this call include discussion.

And another take non-GAAP financial measures.

We have made minor adjustments.

And you're exactly right.

And.

Okay.

Alright, Thank you Li.

Asia and noted that non-GAAP measures to the and.

And I will take most directly comparable GAAP measures and is available on <unk>.

And our website at IR day.

Baidu Dot com and you can find at this conference.

In addition, and web.

Cost of this conference call will also be available on Baidu IR website, I will now turn the call over it.

Okay.

Good morning, everyone Baidu delivered another solid quarter, and Q4 and final quarter revenue, reaching RMB $23 1 billion.

That $3 5 billion.

Yes.

Which is up 6% year over year and up 8% for non Florida.

The lateral lengths and 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 and art.

And for non advertising revenue from the fourth quarter growth, 52% year over year, two and annualized run rate volume.

And two 6 billion.

Given by the convergence of AI solution.

Our services and consumer interest.

Such convergence.

Expected to accelerate into the next decade, and Baidu stands to benefit from it.

Let me elaborate on the trends that we're seeing.

Starting from March and transportation.

China aimed to receive global competitiveness and the transport sector through aggressive infrastructure beauty and the Chinese government is promoting multi year plan to install smart transportation network and cities sensors and cameras and public road connecting vehicles that show.

Thank you and it to foster play per driving improved throughput and reduce carbon emissions.

Such government initiative encourages municipal government to shift their budgets towards more software defined kind of per.

And remember.

Apollo's strong brands and intelligent driving and our holistic approach to smart transportation.

Well suited to capture the opportunity and smart transportation infrastructure development.

For example, Baidu sign a strategic partnership with Kwangchow in southern China to deploy the world FERC multimodal autonomous driving and mobility asset serving our map platform.

Utilizing our call over to the Caspian and Bubba bulk robust bus sales.

While it will begin this month to allow commuter and.

The Huangpu district to public transport services on demand and.

Texas ride hailing and other traditional and gasoline powered public transport.

And the bundles margin exportation project.

H Baidu, leading autonomous driving technologies, and Baidu cloud strong technology and protector.

While leveraging the reach and Baidu, ADP and Baidu maps to enable and local easy access to Apple.

For enterprise and cloud, we have seen and customers.

And granted to Baidu cloud due to our strong Internet Foundation.

For example, and major E Commerce company and existing App customer began using our cloud services a year ago.

In the past year and customers from business growth two massive.

When the customer realize that Baidu AI cloud was able to support and businesses with over 100 million daily users and enable them to expand rapidly and customer increased purchase of Baidu cloud 30 day by 80 truthful from.

And year ago.

Overtime, we believe Baidu AI cloud and to benefit from our existing advertiser base and grow stockpiles and enterprises.

And our provider neutrality.

And the phase of enterprise customer adopting multi cloud from either strategy.

Okay.

From this example, we see strategic advantage of concurrently operating in the AI solution.

Our services and Internet market.

And the practice and the public sector embrace digital transformation.

And to strengthen and expand their relationship with their customer and constant here and online.

As we enter the net decade, Baidu is well positioned and.

Leading AI company with a strong Internet foundation to see the huge market opportunity and cloud services.

And that's driving smart transportation and other AI powered area.

Turning to Q4 operating highlights.

Let me start with AI cloud Baidu cloud continues to be number one in China AI public cloud market per Idc's latest report.

Martin and the third time that Baidu has.

Net.

Baidu AI cloud offers a full suite of cloud services and solution and.

And differentiated in the market with our use of AI to our cloud solution and improve our customer operational efficiency and service level.

Our AI solution, demonstrating scalability and replicable.

Multiple industry sectors.

For example, our AI call Center solution, which uses baidu brain to handle customer calls and the conversational AI is growing and repeat purchases.

Our first the key customer a major telecom operator has followed up with two more purchases, our AI cost center and install them and their customer service center nationwide.

As we strive for customer satisfaction and best in class solution.

And I call Center solution.

Definitely expanded from telecom and other sector, including airline financial services energy and automobile.

Through greater industry adoption.

Model training time and have dropped by more than 50% and the project implementation has been shortened to one month.

And the area of vertical cloud the Smart Transportation project. This huangzhou served as a lighthouse project, but other cities to follow.

And the deployment upon them and allow <unk> to other robo taxi and blah blah blah.

And place of taxi rides or other.

Public transportation.

The implementation of B to add smart growth infrastructure equipment, 102, intersections and the street and the knowledge stated district up Huangzhou cameras and sensors, enabling better traffic management.

Commercial vehicles entering the vicinity installing durable and powered rearview mirror to enable traffic violation improvement even in the license plate up of violating vehicle is covered by a month.

The Guangzhou project uses Apollo AACE transportation engine, which in essence.

And for patient cloud solution.

Net processes and traffic information from Apollo math and B to App.

<unk> connected vehicles and.

Baidu map.

It provides and traffic agencies better information to improve traffic management and transportation services and.

And it enables a total and other compatible vehicles better understanding the ramping traffic condition.

Similarly, we recently signed a second contract with the city.

And to expand coverage, although smart transportation and their sales.

Our strategic partnership with Beijing, Guangzhou, and Shanghai, and <unk> to name a few to provide smart transportation is becoming an important milestone in the development of Morgan Stanley.

And the mean towards the public sector to use AI to improve metropolitan traffic public transportation and air quality.

Turning to intelligent client and we continue to invest aggressively self driving technology for passenger vehicles and robo taxi fleet management.

Our total.

Once again.

And number one in China for autonomous driving according to the 2020 <unk> autonomous vehicles go tap to report.

The reported highly respected in the industry are facing traffic authority and closely monitor autonomous driving pets mouth.

Apollo accumulated test miles.

Reached $4 per screen Milan in December.

Total has been granted China's first driverless testing permit and.

The only.

Chinese company to be granted driver testing permit from both California and China.

In terms of autonomous driving operational experience and total robot taxi and blah blah blah.

Uh Huh provided over 210000 right to the public as of December 2020.

We are proud that door OLED for auto operating system power and auto infotainment has been installed in over 1 million new vehicles just to last year.

Two two market trend.

And one mobile home and in vehicle Internet.

Converting baidu free Internet platform designed to drive synergy across usage platform enable us to more OLED for auto and two languages of large developer community for.

Baidu Smart mini program.

To populate Gil store and the same time.

Consumer benefits from the consistency and from minority Arturo.

Good day back from mobile and home a moment.

Two.

And our buyer turning to best in class top gun and capability. So that they can do more and enjoy the arrived and car.

And the rig towards building new vehicles.

<unk> sales training capabilities through AI and create a big opportunity for Baidu.

Let me talk about the progress of total self driving or AFP.

And two HD map ABP and AFP.

To date, we have signed strategic partnerships with leading automaker to power their new vehicle models with Apollo soft guidance or is it.

Baidu is uniquely positioned to offer high definition map, our HD map.

Critical component for self driving cars.

<unk> heard from China, we have invested in Baidu maps for many years and on one of the very few companies and China offering HD map.

Sure.

Last month, and Wm motor and leading Chinese EBIT maker and the mass production of the new W.

And <unk>.

Due to release in the first half of this year.

With Apollo automated valet parking or ADP.

Level four service option.

We are excited to announce that we will be taking order Apollo autonomous navigation and pilot or A&P.

It's based on a follow up meeting 100 and driving technology.

This timely.

China accounts for agency released the draft regulation to allow high we'd happy autonomous driving.

We believe and to and integration of hardware and software while it makes the best a vehicle. That's why we are and the process of setting up and intelligence EBIT company and we have entered into a strategic partnership with.

Multinational automaker to a down to Ut holding group to offer.

Memorial design and manufacturing for Baidu, New EBIT company.

Judy held the distinction of best selling Chinese automobile brands in past years.

Under the Basel and Gd brand.

By combining baidu and <unk>.

Expertise in autonomous driving and smart transportation with Judy expertise.

A leading automobile and EBIT manufacturer and we hope to pave the way for the future passenger vehicles.

Turning to <unk>.

Which continues to see strong adoption monthly voice queries from third party devices reached $3 6 billion, that's up 66% year over year.

And we're all at the outdoor now offer over 4400.

And our focus on user skin, leading AI capabilities athlete channel marketplace number one and global shipments.

According to all free market research firm IDC strategy analytics and canal.

And for.

The third quarter of 'twenty.

Turning to mobile ecosystem.

In December and EU of Baidu, App reached 544 million the number of greater.

By GAAP part nearly triple the total number of smart mini program growth.

124% from a year ago.

From a yield.

Smart mini program reached $414 million.

This number point to a thriving internet platform that is attracting a large number of third party creator publisher and service provider.

The same trend can be seen in our vertical and community effort.

For example.

Quarter over quarter basis, and daily average viewership of video and <unk>.

Baidu health growth, 92% and daily average liability with session hosted by a healthcare professional growth 163%.

Yes.

E Commerce touches the lives of one one.

And bill and Internet users each month in China.

Through our AI building block, we enable users to have single lava, meaning that our users and locked into our app to check it off for express delivery Center Ophthalmograph delivery pickup just by 13 and clicking the applicable delivery companies and surgery left.

The service and convenience are and aggravating block enabled daily Express delivery therapeutics to surpass 4 million times, just a month after the online in Baidu App.

And the vibrancy of our mobile ecosystem allow third party services to quickly ramp up and our search nature and support the survival of long tail services.

And daily login users on Baidu, App surpassed 70% up 18 points from a year ago, which created a strong foundation for further growth of third party services and non and offering.

Offering and Baidu.

And monetization.

For the fourth quarter revenue for managed page reached a third of Baidu port online marketing revenue.

Up from less than 24% a year ago.

Over 300000 managed page customers have adopted Baidu marketing cloud, which enables them to purchase marketing services.

In January and.

And maintain lifetime relationship with consumers through the tools and services offered on our hosted platform.

Our marketing cloud per rig.

Right.

And like services for example, allowing merchants to message customer.

And who have previously interacted with them.

Such TR and feature facility re contracting and other measures to improve overall marketing.

We aim to integrate YY onto our platform in a deep and thorough way.

Bearing with other large mobile ecosystem, our non advertising revenue represented.

Much smaller percentage, which means.

And a huge potential for upside.

The <unk> acquisition will help speed up the <unk>.

And then our non AD revenue, we were allowed YY broadcaster to increase their fan following on Baidu.

Hundreds of millions of Baidu user, while being able to enjoy more live streaming content through baidu, app and how kind of short video and Baidu products.

We believe such large scale product integration and well create significant synergy and content infrastructure and monetization.

We also plan to leverage YY to accelerating the divestment of information and non expenses like training and Baidu.

This effort will not only improve user stickiness.

And vibrancy and our largest internet platform. We believe lastly has the potential to evolve beyond hosted and to become a major way for community.

Baidu to further develop and merchant to increase the user.

User engagement and grow their social assets the.

And the Baidu platform.

User attention you already shift toward.

And interactive content basically advance our <unk> and augmented reality.

And to increase value.

And that likely will be and integral components of future content development and we are excited about this opportunity.

With that let me turn the call over to permanent to go through financial health.

Thank you Robin and Hello, everyone and welcome to Baidu fourth quarter 2020 call.

Monetary amounts used and my discussion renminbi unless stated otherwise despite.

Despite an unprecedented year.

And this has returned to growth and our profits were solid and the fourth quarter Baidu as the online marketing and it's widely diversified covering many industries and the Chinese economy, and we are benefiting from a rebound of the Chinese economy concur.

Concurrently our non advertising revenue is growing rapidly, especially for the new AI business.

Non advertising revenue was up 52% and the fourth quarter, reaching 18% of Baidu core revenue.

We recently conducted a Tam.

We recently conducted a Cam 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 a ton. That's driving was 10 times the size of our online marketing town and expect the CAGR to $2025 three times that of our online.

Marketing talent to <unk>.

Potential for 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.

And there are over 100 cities in China with a population of over $1 million. When you consider a robust project recently experiment and collecting twenty-five renminbi per each right. That's fair collection becomes feasible, we could see an increase and robo taxi demand, which could drive our mass revenue under transportation cloud the service component of fleet management.

For fiscal 2020, Baidu core revenue reached $12 1 billion and U S dollars and we spent 21% of research and development.

Which is a testament to our commitment to technology, especially in the area of research are consistent heavy investment and technology has made baidu pedal pedal the number two deep learning framework and the world Baidu open AI platform, the largest developer community of its client among Chinese companies and our.

And I patent portfolio with the largest and China.

Our investment and AI runs the gamut of technology developer community.

Patents chip design and talent.

As we began to commercialize AI at scale the incremental revenue that we derive will be reinvested to product development sales and project delivery and to further accelerate AI commercialization and strengthen our moat and our.

AI business.

Unlike <unk> business to be and <unk> will require that we hire developers sales and engineering delivery personnel a few quarters ahead before they start contributing to revenue.

And at the same time as our solutions become more widely adopted and we develop more toolkits margins usually improve.

He will also gain synergy coming from multiple businesses scaling while leveraging off of Baidu brain.

AI engine.

We are excited about our non advertising opportunities from cloud services to smart transportation to intelligent driving which includes self driving services intelligent Ev's Robo taxi fleet management as well as non advertising upsides and more.

<unk> ecosystem.

Turning to financial highlights total.

Total revenue for the fourth quarter reached $30 3 billion.

One 6 billion U S dollars, increasing 5% year over year, our business improved mainly from Baidu core, which was up 6% year over year in the fourth quarter to $23 1 billion or $3 5 billion U S dollars compared to down 13% down, 3% and up 2% per.

Q1, Q2, and Q3, respectively, let.

Let me give you more color on.

Each component Baidu core.

Our AI cloud grew 67% year over year, reaching 2 billion on annualized basis.

And so growth benefit from enterprise customers coming from the Internet media business financial services transportation and health care sectors.

Our intelligent driving and <unk> revenue is also growing but it's near term contribution may not be as apparent.

Paula self driving what we call at ASD services, our book on a multiyear basis, and we recognize revenue when and automakers new vehicles are shipped with the installation of our ASD and services.

We have signed strategic partnership with 10, leading automakers per ASC, and we're taking orders for autonomous navigation pilot or A&P.

Our mobile ecosystem, many of our AD verticals are growing including healthcare education into.

Internet retail real estate home furnishing and auto.

And that advertising the majority of Baidu core AD revenue continued to see double digit growth benefiting from the growth of search queries and CPM.

AD revenue is partially offset by Baidu and yet we are prioritizing profitability over revenue growth.

Revenue reached $7 5 billion.

Down 1% year over year subscriber.

Subscribers reached $101 7 million December.

Further strengthening its foundation to produce entertainment blockbuster originals.

Non-GAAP operating income for Baidu and Baidu core.

It was $7 1 billion and 8 billion per $1 2 billion U S dollars respectively non.

Non-GAAP operating profit was down 5%.

For Baidu core and non-GAAP operating margin for Baidu core.

Was 35%.

Cost of revenue was <unk> 14.

$14 5 billion down 6% year over year, primarily due to the decrease and content cost of traffic acquisition costs bandwidth costs and the amortization impairment of intangible assets, partially offset by an increase and cost of goods sold SG&A and R&D together with $10 5 billion up 24% year over year.

Primarily due to an increase and promotional and R&D personnel related expenses.

Adjusted EBITDA for Baidu and for Baidu core were $8 6 billion and $9 4 billion from.

For $1 4 billion U S dollars, respectively cash.

Cash and short term investments for Baidu and Baidu core at the end of the year were $162 9 billion and $148 6 billion or $22 8 billion U S respectively free cash flow per Baidu and.

Excluding <unk> were $3 8 billion and $5 4 billion or.

$827 million, respectively Baidu.

Baidu core had approximately 3200 32008 hundred and full time employees as of December 31st up 14% from last year during.

During the fourth quarter returned $600 million to shareholders, bringing the cumulative share repurchase in 2020 to $1 9 billion U S dollars.

<unk> to $709 million in 2019.

Okay.

Turning to first quarter guidance.

And for the first quarter of 2001, Baidu expects revenue to be between 26 billion and $28 5 billion renminbi, 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 potential contribution from the acquisition.

And why wildfire and.

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 fourth quarter results.

We have made significant strides and preparing baidu for the next legs of growth 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 sales.

Diving services intelligent electrical vehicles and autonomous driving.

And for our non advertising business.

Before including autonomous driving is about 10 X setup, our online marketing business and the CAGR.

X faster.

We get a glimpse of the impact of these opportunities with coupons and non advertising revenues growing 52% and already reaching 18 per cent of our core revenues, we view Baidu core's business on and three revenue growth curves mobile ecosystem, AI cloud intelligent driving and ODI with non advertising value added.

Services, and AI cloud to Bruce our near term revenue growth and with intelligent driving and other growth initiatives to boost revenue growth further out.

Over the past quarters, we discussed the aggregation of services on Baidu platform.

Technology convergence trend.

Net Robin talked about will allow baidu family of apps to be equipped with unique services offer from us working directly with enterprises and the public sector. Robin gave an example in the smart transportation sector. We have also seen this trend and the health sector.

And we are working with hospitals to provide their services and doctors greater internet presence, some causes and industrial Internet, where there is a deep integration with enterprises and the public sector of each industry and provide them with a turnkey solution to internet presence, our strength and building technology infrastructure puts us at and.

Advantage and the Internet environment, where synergy is generated from our offering of cloud and the.

Gross and it is and.

And mobile ecosystem concurrently.

Our mobile ecosystem is benefiting from a rebound in the Chinese economy, and we stand to benefit from leveraging our large user base to grow and non advertising revenue such as fully integrating YY onto baidu platform.

On capital allocation, our share repurchases in 2020, total $1 9 billion and U S dollars, which reflects the conviction that we have and the direction of our business.

Over the past two decades, we have demonstrated a track record for long term growth and strong profitability.

The heavy investment that we're making to seize growth potential and puts us on a path to further improve our long term growth.

And by talking about our efforts and ESG. We recently released four series of ESG report clarify our policy and anti corruption non discrimination privacy protection data security talent and empowerment and low carbon.

Emission commitment.

More importantly, baidu, FAA, antonymous, driving including empowering he BS and robo taxi as well as smart transportation and decrease carbon dependency enables the improvement of traffic congestion and air quality do AI and cloud services supporting Green energy and Green environment. We are pleased that Baidu is 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 session.

If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press the pound or hash key that day.

<unk> are requested to restrict to one question at each time.

Your first question comes from and the line of Alicia Yap from Citigroup. Please ask your question.

Hi, good morning, and good.

Good morning, Robin Herman and Sharon C net huh.

My questions is related to your partnership with GB and.

Can you share with us some colors on the expected timeline for.

These new EV to be released and what Baidu Wanda to achieve out of it and.

Baidu also continue to seek for partnership with auto OEM to co produce.

And you know.

Just related to that is it seems like <unk> is also working with them.

Multiple 80 companies.

Companies and also working on developing that on a dos. So how would you describe the partnership and your relationship with Judy. Thank you.

And hi, Alicia this is robin.

Let me answer your question our partnership with GB.

And based on that.

I believe that and to end up.

Integration hardware and software will provide the best experience for autonomous driving or a vast market EV and in the past we had a lot and we have devoted a lot off day rate.

Lance.

Autonomous driving technologies, we try to push this to.

Integrated into our.

Our OEM customers, but most of the traditional Oems are.

Tend to wait on someone else and adopt the newest and ladies and.

Technology.

That's why we decide it's time for us to just debuted.

Benchmark a vehicle to show that to how good the experience is.

It also serves the purpose of better and faster and stronger feedback loop. So that we can improve our self driving technology faster right now on that.

And the venture is progressing very well, we have a seal onboard and we have decided that the brand of the new vehicle as you know he can take you really takes off around three years from that.

And the beginning to the launch of a new EV model and.

We try to.

And do the same for for this new venture.

Uh huh.

On the other hand, Apollo and <unk>.

Baidu brain in general remains to be a fair and open platform.

And we will continue to work with other Oems to provide does that and as a technology and.

And the products and two of them whenever that is needed.

We well.

Serve them to our best efforts and that's and games.

Pat just.

Without someone.

First trying they tend to wait and now we have a flat.

Flagship why and we have.

We have and <unk>.

Mark.

And they can bottle I'm sure. It will also help.

Revenue of our of.

The Apollo.

Our technology provides a part.

At home and styling.

Great. Thank you. Our next question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Hi, good morning, guys.

And if they follow up questions.

Oh Wow.

<unk>.

I remember one of the key seasons behind AI call is Bob <unk>.

Should have better margins and some of your competitors, which are focused on some of the more infrastructure cloud services and so what's your thought.

I'm wondering.

And you can offer some not necessarily offer quantitative guidance, but from a margin outlook for your AI cloud thesis given.

And your competitors already achieving breakeven status. Thank you.

Yeah, Hi, Addie.

Happy New year, and this just from and I'll take that.

And so what I call, we have several pieces of our business and our cloud we talked about R. R.

The enterprise cloud, which is <unk>.

But we are differentiated and the market, which it with AI solutions, such as Paas and SaaS and clearly when we're able to do Paas and SaaS, we see there as much.

More profitability to be made over assets, but what we have to recognize is that when youre going into a second software space.

And as 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, but that was actually.

Very very poor margin, because you're going into a new environment you might have a good product where you got it.

<unk>.

Our efforts to integrate with their existing legacy systems. So as you build that out as you're selling to more customers and so forth and make the Arctic and more standardized and.

The next few versions of this.

How's your profit margin to increase so because were growing so fast and we're playing around and the product we would not expect profit margin at this stage to be.

And were comparable but when we look at our product lifecycle, such a day.

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 on the one part.

On enterprise cloud and so forth.

Our margin and it's gonna be a function of how much and path and how much it.

The pathway to have that how much is app I can add over time, because we're differentiated with.

And the SaaS and Paas and over time with and that proportion and P&C.

Big and bigger I think are profitable, we'd be better, especially when the products and matures and then another big part of our cloud.

And as for example, our vertical cloud such as smart transportation and again that principle.

Product maturity, but that principle.

Mix of debt and 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 popular them 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.

Appears where they can just allocate expenses to the other.

Businesses, and so forth because the infrastructure is sustained and so I think profitably I think one is how you do allocation expenses. Another is are you focused more on software do you have a differentiation and the software sector.

And our AI solutions and the hub triggered quite a bit over the product lifecycle. I think these are determinations of future profitability.

Yes.

Thank you. Our next question comes from the line of Piyush <unk> from Goldman Sachs. Please ask your question.

Thank you for taking my question and congratulations Robin Robin for splendid quarter, great outlook and kind.

And I'll just go back to the intelligent EV company that you've talked about Robin and he talked about it's free of lead time to get a car to market under the name and so you have selected a name and let's call. It Baidu car for the time being why would it take free is for that to happen first and second when you launched that car and.

I'm just trying to fish also what segments are you targeting and are you targeting a certain market share and this explosively growing market.

And trying to and we're trying to get a better sense of how this will evolve with time and why.

This is happening what happens to the revenue lines as we start to see your crude from the.

And the A&P and particular, so if he could give us a sense of what price it could be like.

Products like the A&P that has just gone I suspect live right now.

And I'll stop there.

Hi, Piyush.

Yeah.

As I mentioned and that.

The reason we're doing that.

Martin.

That we wanted and frame the best.

Our technology too.

To the market so the selling points that may.

And then point of this.

New.

Car model will be more on the software side or the.

Software and hardware and integration so that the better.

And I'm driving capability as well as better infotainment, because up to Alaska for auto et cetera et cetera.

We well and.

Price range or demographic target when we think it's done.

It's mature enough.

Well, we are really ready.

For that but.

But.

That means that you can you can count on that and we will try to.

Speed up the process to launch this new car and someone ask we can and.

And well be the best car on the market, but the factor.

Accounts driving technology and.

Infotainment.

For the commodity car people generally call.

But for us.

Growth.

And it's not.

Electric and the real point and intelligent and weight best day in terms of the.

Hello, and driving and we will fully leverage this kind of flow.

Kind of a capability.

Non.

And how much.

Yes, and let.

Let me elaborate that have huge went went just to go a little bit deep, but give you more color on the meaning of intelligence. So when you look at it he vs. Right. There there are several components for example theory.

He of Paul self driving services that we talked about that would be.

T map that would be valet parking that would be.

Navigation pilots and stuff like that right and and our model is different than most of EV manufacturers, where we licensed <unk> and yeah right. So so we can spend that R&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 one number two.

And 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 the west for auto as we mentioned and.

And what we've already.

And it's well over 1 million cars 2020, and again, that's the model we're working with several Oems. So we had the edge and these two areas. In addition, we're doing autonomous driving and so we can leverage that technology and more importantly, you got to realize we are doing this on and ecosystem basis. So on day, one hand is making the car more.

And.

And from ASD from connected vehicles.

But from a tonnage driving another is the fact that we're doing and <unk> will start transportation because a lot of.

The data and.

Gather and are.

Transportation.

Cloud.

Whether it's on the ROE, whether it's through the maps or whether it's connected vehicles and so forth. We can understand the role better so all of that data and that capability within empower our EBIT. So so two things number one is we think our EBIT can be more intelligent because we're doing other components and because R&D is a center.

And it supports other manufacturers and secondly, because of our ecosystem strategy, where we're coming from.

Patient angle and also from the different components.

Alright. 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 transportation side can you guys maybe.

The framework on the government's plan and it's a building all across the country should we think about that build out being maybe a top 30 markets and also maybe help us understand the bidding process flow city 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 and.

Youll experience autonomous driven miles or your ability to offer multiple services on the platform and also lastly, and maybe Herman you can address this can you talk about the level of investments that is needed.

And do you make for smart transportation and also for autonomous driving over next few years and would you be breaking out the core advertising and margin separately. So we can also see the organic growth sorry for a long winded question.

Hi, James.

And in terms of smart transportation and we are we.

We are the pioneer of the AC He concept, which means that we are the first company to really consider transportation assets.

As a whole.

Using a more software centric.

Solutions to improve the throughput.

Throughput to connected adult with vehicles and to help reduce.

Sedans and and.

Reduce and carbon emission.

Yes, when will he be well.

And we talk to the potential customers of all kinds of different.

Here cities, they will obviously compare and.

And by multiple vendors to pit those kind of projects, but in.

Almost all cases, we are.

So much ahead of any competition.

And essentially.

If they care more about the effectiveness of those and smart transportation projects.

Wayne.

So with so much I had because.

Apollo and <unk>.

System, if they're open and we've invested in.

This area for many many years and our capability.

And provides a solid foundation and we have been.

Hum.

And on up customization for smart transportation and that's up from I mentioned previously.

And initially that the margin could be low, but when we repeat this kind of projects city after city the.

And the margin improves and the overall quality margin for smart city.

Smart transportation projects.

Keep improving.

It's a much better than the past and C D and Dennis Awesome.

A lot of cloud services.

Our investment.

Yes.

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 smart transportation is part of our cloud.

Cloud.

So.

So what youre seeing is already built in there and you mentioned and what it whether it's our margin look like for our core business.

And so as you're asking for mobile ecosystem, so for mobile ecosystem.

Our margin.

And that on a non-GAAP basis, usually is between mid forties.

Hi, <unk>.

And we've been pretty consistent over the last couple of years, sometimes when.

And and a higher quarter, we might see a reach of over 50, but usually Isabella day range and.

And we currently expect to be in that range right. Now. So you can see as I talked about the pre COVID-19.

Both mobile ecosystem will try to maintain within that range and then.

And for our new business, and so forth and look at it.

Because that is more about how we fund and white to optimize growth per index a couple of years.

Thank you. Our next question comes from Jerry Liu from UBS. Please ask your question.

Hi, Thanks management happy new year.

My question first day, just to go back to the revenue.

Our revenue guidance for the first quarter are definitely a bit stronger than we even expected. So wanted to look at where some of the key growth drivers here.

On the non AD side I would assume some of it is related to cloud and smart transportation I'm wondering if there's any other key growth areas and then secondarily and the core advertising business do we chalk this up to improving macro or are there some maybe.

And the different dynamics in terms of competition or.

Thank you.

Yeah, let me answer it.

And our components.

We talked about how our non advertising is now set up our revenue and in Q4 is growing robustly a 52% we expect our non advertising to continue to.

Our growth our overall baidu. So many it's going to because a lot of these are new businesses, it's going to be able to pull their weight smart transportation and as part of cloud and we talked about is over a 67% growth in Q4, So I think that with.

Our strong operating and so forth I expect.

Just to continue into 2021, but do recognize that there is seasonality for example, when you think about.

AI cloud Q4 tends to be stronger than Q1, but just so how the budget looks and so forth, but overall I think non advertising, it's going to be driving us and not only and cloud for example, and our other growth initiatives such as our <unk> and so forth. We think that these are all going to be engines of growth.

<unk> talked about earlier about <unk>.

Uh huh.

Paulo 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.

Advertising and business I think several things I think number one is the economy is coming back so the macro help certainly but more importantly is baidu <unk>, we talked about in App services several times already.

We see and user behavior switching from browser into in App services, because we have I believe we're the only one.

At this scale and China, where the App was designed as a search app and it's open and allows worldwide web search and allows content from all different apps and from all different websites because of that and because the content and services on our platform, making that closely native app experience to bear.

And we think in China that the AI building blocks provides we think that that helps.

Helps user behavior and.

Because of you know.

Craig growth and so forth that helps drive our revenue and then also because its native app.

And on our platform, obviously CPM helps so you have to be on traffic growth you have CPM and then also you have the macro.

Drop healthy.

Yes.

Yes.

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 and Robin I think you mentioned that you guys plan to.

Start integrating YY.

And into your own content ecosystem in the coming quarters in your prepared remark.

Can I confirm that the do is do a hat with the previously announced valuation. Despite all of the money would have reported and a changing regulatory and environmental from live broadcasting business in China, and then I think and you also mentioned.

New business opportunities that will gradually unfold as you guys integrate to YY live.

By the streaming operation capability into your content ecosystem can you talk us through from both the key.

Key addressable marquee and the business and model that will potentially and thoughts with the integration process and lastly, perhaps Herman can you talk about how should we think about the financial impact in the.

Coming quarters, as you guys consolidated business and integrate the operations into your content ecosystem. Thank you very much.

Yes.

Alex Let me.

First answer is the best model questions and <unk>.

And so as the regulatory.

And our financial guidance.

Question.

In terms of this model, we basically view live training as yet another new form for our content and ortho new form of monetization.

And for content last training and stuff.

Comparable to text images and videos, including long and short form videos.

Life screening is just a new form of media.

Surf.

And they're fast when you combine all kinds of different and media forms and.

And then.

That's the right form of media whenever necessary and why and why apparently.

Provides.

Very vibrant and and also mature.

Ecosystem.

<unk> lapsed training contents, although they are more.

Sure based content.

But the capability can be.

<unk> transformed into other form off last year's last training.

H R E commerce related.

And last dreaming and in terms of or.

In terms of monetization, we view the baidu platform as a whole our mobile ecosystem with Angelus millions of users log onto our platform. Unlike daily basis, and we are increasingly provide.

More native App experience and.

Super majority of users.

Lofty.

And so that we know.

They are and they are.

They can have a better.

Experience going from here.

Two zero right now that the large user base.

Primarily.

Monetized through advertising.

Hum.

And you all when you compare.

With other <unk>.

Large mobile ecosystems.

Typically haswell, and you know more than 50% of their robin coming from non advertising and.

And for Baidu and <unk>.

And to our advertising or online marketing, we can monetize our and our user base.

Through live streaming through subsequent channel through E Commerce.

And many other forms of and <unk>.

Revenue stream.

The rationale.

Behind that though.

Why why acquisition.

Hey, Alex can you help me with that.

Question on body water reported again.

I didn't hear the whole thing.

Yeah.

Just wanted to clarify the transactions do going behind that despite of the margin.

And my water report and a changing regulatory environment and also the.

He is the do you see going ahead with the previously announced the valuation.

Yes.

Yeah. So you asked quite a mix of our questions with regards to the muddy water reported I think.

And the Joy has come out with a statement as you guys know they have a higher a global legal team and they also hire a big four auditor and.

And they have made their own.

Announcement, that's a joy announcement not baidu announcement, so I think.

Looking at that what would be the best with regards to our regulatory environment. We are cognizant of the situation and.

And that's why we think that and wanted to navigate as you as you know you have a lot of experience looking at this as you know whenever there is a regulatory.

And.

And that that you'd have to steer towards its more important to have a bigger leading player in China, who have good relationship with government and who knows how to do things correctly, and so forth and we needed and experienced team and that gives us a better reason if we if we're going into our live streaming and we will fight a large.

<unk> team. So this is more of our acquisition of a team that did and that particular product.

Just just a business.

The team talent Cherie appointed.

With regards to their contribution and so forth.

Currently we're moving ahead, what were planning to integrate onto our platform as Robin has said and.

We're currently dealing addressing with some conditions and procedures and.

We are still on pace to do the closing as we announced previously we're moving ahead with this and.

Their revenue is usually between 2 billion and $2 five bill and a quarter. 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 with the original place we do have a stipulation and agreement to protect our Baidu shareholders. As you mentioned they would do it with somebody water reported.

And the big four of 2016 came in and nausea, and it being the global Tony came and did I see anything but to protect US we do have an indemnification in there.

To get a recovery just in case, something blows up and our head.

As a result.

Situations and so forth.

So.

Did I answer your questions.

Well, thank you very much.

Thank you all.

Thank you. Your next question comes from Gregory Zhao from Barclays. Please go ahead.

Alright, and Samsung, taking my question and happy Chinese new year.

And so we know now baidu and have a different business lines cloud autonomous driving mobile smart devices and Susan.

D D operation and just wanted to know how the management team how do we piece of a time span and <unk>.

Offers among all the different segments and and what's your current day.

Priority and a quick follow up on your or Etfs. These tons and so you mentioned the partnership with him leading our automakers, who he and futures.

What's your best Guesstimate, how is the pricing are often freestyle, reducing COVID-19 safety and products.