Baidu is About to Stop Producing the Most Intriguing Smart Speaker on the Planet
Baidu has stopped production of the Raven H Smart Speaker according to a new report by The Information (N.B. paywall). Raven H’s physical appearance and modularity made it the most intriguing smart speaker in a market filled with one-piece plastic cylinders. The company launched the device in November 2017 and was present in Las Vegas for CES 2018, but apparently never took off in China. The Information reports that the Baidu division only manufactured 10,000 units which is a sharp contrast to the two million Tmall Genie smart speakers sold to date by Alibaba.
Raven Tech, the company behind the smart speaker, was acquired by Baidu in February 2017 for a reported US$90 million. It seems like a rash decision to scrap a smart speaker that has only been in market about six months, but apparently the company has had internal disagreements about the strategy of going after the premium segment instead of mass market consumers. According to Yunan Zhang in The Information’s Hong Kong bureau:
“Raven’s central role seemed to be cemented when its speaker received prominent billing at Baidu’s annual tech conference in November…But a few months later, after poor sales and internal disagreements over whether to sell a high-end device or a mass market one, Raven Tech engineers were told to stop working on the speaker…Baidu eventually decided that there wasn’t enough of a market in China for a pricey voice-activated speaker like the Raven H”
Pricing More Than 3x Higher Than Alibaba
A key problem for Raven H, may simply be a misalignment with Baidu’s corporate strategy. Baidu is a mass market company with nearly universal reach among online Chinese consumers and over 70% of search market share. Raven H pricing was closer to Apple HomePod (not officially available in China) than an entry-level mass market device like Amazon Echo (also not available in China). The Yuan 1699 list price is roughly equivalent to US$265 while Alibaba’s Tmall Genie X1 has a list price less than one-third of Raven H at around US$78.
That pricing difference was exacerbated by frequent discounting promotions on the Alibaba smart speaker. At one point, consumers could buy a Tmall Genie for Yuan 99 or about US$15. In addition, Xiaomi introduced two smart speakers at even lower price points Yuan 199 (i.e. US$31) and Yuan 299 (i.e. US$46). The strength of these low-priced offerings helped Alibaba and Xiaomi to not only capture top market share positions in China, but also to land in third and fourth positions globally in Q1 2018 behind only Amazon and Google.
Baidu’s Other Smart Speaker Has a Display, “Little Fish”
Even at CES 2018, the Baidu World presentation featured three voice-activated devices built by Ainemo. The first was the “Little Fish” smart display which debuted at CES 2017. It’s success was lauded by Baidu COO at the time, Lu Qi, and the company announced another sleeker and less expensive smart display called VS1 scheduled for launch this year. It also announced a smart speaker lamp which was simply characterized as a lamp with a smart speaker in it.
It was really interesting that Baidu spent nearly an hour talking about three voice-activated devices by Ainemo at Baidu World which was held in the Mandarin Oriental Hotel and they never mentioned Raven H which had a small presence in the back of the Las Vegas Convention Center. In retrospect, the split was already underway.
Restructuring and Heading Down Market
The Information article characterizes the year-long saga that led to an initial order of 100,000 units being scaled back to only 10,000 and the Raven H team falling from 80 to around a dozen operating under Raven Tech founder Lyu Cheng.
“Baidu executives wanted a cheap, mass market product, according to people who were briefed about it. Mr. Lyu, an acolyte of Apple co-founder Steve Jobs, wanted to make a high-end device…Mr. Lyu had always wanted to build what he said would be an iPhone-like ‘definitive product’ to replace the mobile phone…Yet production was repeatedly delayed as Raven Tech negotiated with manufacturers over how to meet Mr. Lyu’s high standards, employees said.”
Baidu is pressing ahead with its Ainemo products and some still believe Raven H can succeed as a high end product. However, the company has also embarked on a new project to build a low-priced smart speaker under the direction of Yang Yongcheng who moved to Baidu from Xiaomi after working on the Yeelight product. John Choi of Daiwa Capital Markets told The Information:
In order to dominate the market, it’s crucial for Baidu to have a strong smart speaker. That’s the first step.
It is still very early in smart speaker adoption in China. If Baidu comes to market this year with a low-priced alternative to Tmall Genie and Yeelight, it can still be very competitive for mass market consumer adoption and the presence of smart displays and higher end smart speakers in its portfolio might even become an advantage.