Baidu Earnings: Mobile Matters
Chinese search giant Baidu (NASDAQ:BIDU) posted third quarter earnings that attracted mixed reactions from investors. Total revenue for the quarter was 6.251 billion yuan ($994.6 million), a 49.7 percent increase from the quarter in 2011. Operating profit was up 48.1 percent to 3.297 billion yuan ($524.6 million).
CEO Robin Li said early on in the conference call that the company is “working hard to close the mobile monetization gap, although this will inevitably involve a period of transition.” Spoken like a true Facebook (NASDAQ:FB) executive. There are a number of interesting parallels in how the two companies pursue mobile monetization.
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Baidu’s mobile search traffic grew 25 percent quarter over quarter, and a whopping 110 percent year on year. Like most companies in the Internet industry, Baidu is facing a fundamental transition in how people interface with the Web. Perhaps more importantly, they’re facing a change in how to effectively target those people with advertisements. Baidu still earns higher rates for PC ads compared to mobile. Mobile now accounts for 20 percent of overall traffic for Baidu services.
“We are fully committed to pushing this transition forward and confident that our efforts in mobile monetization will pay off in the long run,” said Li.
As part of its mobile initiative, Baidu launched a new mobile browser in the third quarter, as well as a number of updates to services including its mobile maps and video platform.
The company grew its advertising customer base by 28 percent year over year, and revenue per customer was up 17 percent for the same period.
“The transition in search to a more mobile-centric model is well underway in China. And while we are naturally very excited by this new opportunity, we also understand well the challenges that any evolution of this scale inevitably brings. I want to emphasize that there will be a transition period lasting a couple of years before the mobile monetization gap will close,” said Li.
A few months ago, a statement like that could have had investors running for the hills. In the wake of Facebook’s recent earnings, talking up mobile monetization doesn’t seem to far fetched.
“The reward that mobile stands to bring are huge, and with superior strategy and size, we are focused, confident and ready to win the future,” concluded Li.
The comment about size could have been a jab at competitors Sohu.com (NASDAQ:SOHU) and Qihoo 360 (NYSE:QIHU), which play the roles of Yahoo Search and Bing to Baidu’s Google. Speculation about whether or not Qihoo — and less likely, Sohu.com’s Sogou — will disrupt Baidu’s massive share of the search engine market has waxed and waned in the past. Baidu got beaten up by investors in September as Qihoo entertained discussions with Google over a strategic relationship.
As it stands, though, Baidu looks like it is sitting at the top of the Chinese search engine market and it is competently securing its position. That being said, the stock has slid over 8 percent this year to date.
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