Baidu’s fourth-quarter earnings report presented a mixed bag for the company known as the “Google of China.” Though its profit jumped by 36 percent in the quarter because of an increase in advertising spending, its 41.6 percent year-on-year revenue growth was the slowest since 2009, according to Reuters.
Most of Baidu’s revenue comes from search-engine advertising. Though the Beijing-headquartered company’s online marketing revenues climbed 40.8 percent in the fourth-quarter, that represented a slowdown from its growth of 49.6 percent in the third quarter. In fact, revenue growth has fallen significantly over the past four quarters: it was 59.7 percent in the second quarter, 75 percent in the first quarter and 82.3 percent in the fourth quarter last year.
Baidu had forecasted a slower fourth quarter as China’s economy lags. Other factors include users switching from PC to mobile, and more competitors in the search space. The slowdown in online marketing revenues has worried investors, as Baidu shares have fallen since 7 percent since the end of September.
While the company’s online marketing customer base grew 4.1 percent to 406,000, advertisers spent less: revenue per customer slipped 3.1 percent last year. Baidu continues, however, to hold the majority (80 percent) of the search market in China, according to research firm Analysys.
Baidu’s fourth-quarter revenues were slight ahead of forecasts. The company made revenue of $1.02 billion, compared to analysts’ estimates of $1.01 billion for the quarter. Baidu’s net income of $448.7 million increased about 36 percent year-on-year. The company said it earned $1.28 per American Depository Share, in line with Wall Street expectations.
In the first quarter, Baidu says it expects total revenues of $945.4 million to $975.9 million. Analysts are looking for revenues of $967.09 million.
One key factor is whether or not Baidu will be able to leverage its mobile products, which are a key part of its growth strategy. Though it may take a couple of years before Baidu can close the monetization gap with mobile, Baidu is currently using 25 percent of its R&D budget to develop mobile and cloud computing in an effort to build an ecosystem that will allow its PC users to “seamlessly migrate” to mobile.
Baidu is the largest Chinese language search engines. Baidu’s mission is to provide the best way for people to find information online, including Chinese language web pages, news, images and multimedia files though links provided on their website. In addition to serving individual Internet search users, Baidu also provides a platform for businesses to reach potential customers online. The company’s online marketing services include auction-based P4P and tailored solutions. via: Baidu