Hong Kong, February 13, 2025.- Chinese search giant Baidu has taken a bold step in the race for artificial intelligence (AI) supremacy in China. This Thursday, the company announced that its chatbot Ernie Bot will be free starting April 1, a decision that caused its shares on the Hong Kong Stock Exchange to surge by 11.7%. This move not only reflects the intense competition in the AI market but also Baidu’s strategy to regain ground against rivals like DeepSeek, ByteDance, and Alibaba.
The Announcement That Shook the Market
According to a press release issued this Thursday by Reuters, Baidu explained that users will have free access to Ernie Bot thanks to continuous technological upgrades and cost reductions. Additionally, the company removed fees previously charged for advanced features based on its latest AI model, such as enhanced searches and multilingual conversations.
This decision marks a significant shift in Baidu‘s monetization strategy. In late 2023, the company began charging a monthly fee of 49.9 yuan (approximately $6.80 USD) for the advanced version of Ernie Bot. However, in a market where most competitors’ chatbots are already free, Baidu has chosen to eliminate payment barriers to attract more users.
Why Is This Decision Important?
Baidu’s move is not just a response to competition but also a strategic play to strengthen its position in the AI market. According to Shen Meng, managing director of Beijing-based investment bank Chanson & Co., offering Ernie Bot for free could help Baidu capture a larger market share in a highly competitive sector.
Furthermore, by removing fees, Baidu could improve the training of its AI model. A larger user base means more data, which in turn allows for refining and optimizing the chatbot’s capabilities. In other words, this decision not only benefits users but also strengthens Baidu’s underlying technology.
Baidu vs. DeepSeek, ByteDance, and Alibaba
Although Baidu was one of the first Chinese tech companies to launch a ChatGPT-like service, its market position has been threatened by emerging competitors.
1. DeepSeek: This rival stunned Silicon Valley in January with the release of a highly cost-effective AI model. With over 30 million daily active users, DeepSeek has surpassed Ernie Bot in popularity.
2. ByteDance: The company behind Doubao, another leading chatbot in China, has also rapidly gained ground.
3. Alibaba: Recently, Alibaba confirmed a partnership with Apple to offer personalized AI services for iPhone users in China. This agreement has left Baidu out of a valuable collaboration, increasing pressure on the company.
According to Charlie Chai, an analyst at research firm 86Research, in an interview with Forbes, Ernie Bot remains in a defensive position.
“Unless Baidu’s product offers exceptional services, offering free services in April may have limited impact,” he warns.
The Monetization Challenge in the AI Era
Baidu’s decision to eliminate fees raises a key question: How does the company plan to monetize its AI technology? While competitors’ chatbots are free for end users, many charge developers and businesses to access their underlying models for creating customized services.
In this regard, Baidu could explore alternative monetization options, such as:
– Premium services for businesses: Offering advanced features to companies looking to integrate AI into their operations.
– Contextual advertising: Using the chatbot as a platform for personalized ads.
– Strategic collaborations: Forming alliances with other companies to integrate Ernie Bot into their products and services.
The Impact on China’s AI Market
Baidu’s decision reflects the unique dynamics of China’s AI market, where competition is fierce and user expectations are high. Unlike other markets, China boasts a highly developed tech ecosystem, leading to rapid AI adoption in sectors like e-commerce, education, and healthcare.
However, this environment also presents challenges. Companies must balance innovation with profitability while navigating increasing government regulation. In this context, Baidu’s move to offer Ernie Bot for free could be seen as an attempt to consolidate its position before competition intensifies further.
A Risky Bet or a Masterstroke?
Baidu’s decision to eliminate fees for Ernie Bot is undoubtedly a bold gamble. On one hand, it could help the company attract millions of new users and improve its AI model through greater data volume. On the other hand, it raises doubts about the financial sustainability of this strategy, especially in a market where ad revenue and premium services are crucial.
Ultimately, the success of this initiative will depend on Baidu’s ability to differentiate itself in a saturated market. If the company can deliver a truly exceptional service, it may reclaim its position as a leader in Chinese AI. Otherwise, it risks falling behind in a race that shows no signs of slowing down.
