As Profits Shrink, Baidu Inc (ADR) (NASDAQ:BIDU) Opens New Augmented Reality Lab

Baidu Inc

An augmented reality lab was unveiled in Beijing by Baidu Inc (ADR) (NASDAQ:BIDU). The AR lab is part of efforts that the Chinese search engine is rolling out in a bid to boost profits that have recently been on a downward trend. Approximately $200 million have been allocated to these efforts.

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At the moment Baidu’s AR lab has a workforce of 55 employees. The lab will initially concentrate on generating revenue from augmented reality marketing but will at a later point venture into education and healthcare.

“AR marketing is taking off. There are few content formats where the content is evergreen – AR will be like that,” Baidu’s Andrew Ng said in an interview with Reuters.

Pokemon Go game

AR’s increased popularity has been credited partly to the Pokemon Go game developed by Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY). The technology involves overlaying virtual images on a real-world environment viewable on a headset, smartphone or any other AR-capable device. As a marketing tool, AR can be highly effective as it can be used in the animation of a branded space or a product.

The launch of the AR lab precedes the announcement of Baidu’s annual financial report in which it has projected a 4.6% drop in revenues. This was attributed partially to increased regulation on medical advertising which has resulted in a drop in ad revenues from the search business. The number of advertising clients also declined by 16% in the last reported quarter.

Investment fund

Baidu’s $200 million investment in augmented reality is being sourced from a fund the company set up to invest in startups that are in their mid-to-late stages. The Chinese search engine’s foray into AR begun two years ago and has already netted some high profile clients.

While Baidu has not faced the ire of Chinese regulators, some AR services have been denied licenses citing security issues. Pokemon Go, for instance, has not been launched in China yet. However, Ng is optimistic about the future of augmented reality in the world’s most populous country.

Shares of Baidu Inc fell by 0.61% in Monday’s trading to close the day at $176.48 a piece.

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