Divergence in Dominance: A Comparative Analysis of Alphabet and Baidu

Alphabet’s Google and Baidu tower above the competition in their respective search engine jurisdictions: as of October 2023, Google accounts for more than 90% of search traffic worldwide, while Baidu holds a share of approximately 70% of China’s search engine market. Both companies have moreover branched into the sphere of artificial intelligence (AI) through a variety of service offerings ranging from autonomous vehicles (Waymo and Apollo, respectively) to cloud platforms. Yet, as this year’s disappointing launch of Baidu’s Ernie chatbot reiterates, there remains a significant performance gap between Alphabet and Baidu, and, more generally, between the established North American tech firms and their Chinese competitors. This disparity can be traced a variety of factors, such as the global predominance of English online interactions, the two areas’ different regulatory regimes, as well as the firms’ own corporate strategies. Focusing on the latter dimension, this paper delves into Alphabet and Baidu’s similarities and divergences to uncover the interplays between AI advancements and the firm-level political economies that underpin them. I focus on three areas of analysis, namely the companies’ financial statements, their ownership structures, and their patent holdings. Building on previous work on corporate financialisation and platform capitalism(s), I start by exploring the dynamics of stylised financial indicators around firm profitability, shareholder value maximisation, short- and long-term debt contraction, and the balance between tangible and intangible durable assets. I compare not only Alphabet and Baidu, but also both firms with their respective national tech rivals, discovering further differentiation in their business models. Next, I explore the two firms’ globalised shareholder patterns, focusing on the share ownership of institutional investors and, in the case of Alphabet, on the impact of tiered shared classes upon corporate strategy. In light of the increasing importance of AI research and development (R&D), I finally look at the patent catalogues of Alphabet and Baidu to understand the recent evolution of their patenting activity, research themes, and position in the global patent hierarchy. Overall, I argue that Alphabet’s power in the global digital economy is at least partly explained by its sustained investments in cutting-edge R&D and physical infrastructure – two key areas in the advancement of the firm’s AI systems. In comparison, Baidu emerges as a more financialised firm, with cash holdings and long-term financial investments dominating its asset structure, and liable for a significant amount of debt relative to its earnings. For Baidu to thrive in the worldwide AI competition (and in its home market), it would need to materially augment its corporate innovation system by increasing its expenditures in R&D and processing power – in effect, moving beyond the constraints of the search engine market, just as its US rival Alphabet did. This contribution points to shared traits among Chinese and US Big Tech firms, as well as divergent patterns that cannot be explained via monolithic grand narratives around the development of the digital economy in general, and of AI in particular.