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Baidu (NASDAQ:BIDU) hit a new 52-week low on Tuesday and is trading over 5 percent lower in the afternoon. Despite posting year-over-year revenue growth of 49.7 percent and income growth of 59.8 percent in the last quarter, shares have slid over 12.5 percent since October 26
Baidu is the Goliath — or Google (NASDAQ:GOOG), depending on how it’s looked at — of the Chinese search market. The company enjoys 73.5 percent of the search traffic market share in China, with nearly $1 billion in revenue for the recent quarter. As the market leader, its revenue per customer increased 17 percent year over year, with the company’s advertiser customer base growing 28 percent over the same period.
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Understandably, these growth numbers are not sustainable. Even with 60 percent of China still offline and mobile monetization not fully fleshed out, the company issued softer guidance heading into the fourth quarter. At the end of October, the company was slapped with a double downgrade from analysts at Citigroup because of the slowdown in growth and increasing R&D costs. Baidu recognizes that the search and Internet industry in China is rapidly evolving, and that means staying innovative (funding R&D) and addressing changes in the market.
If the company tried to communicate anything with its last earnings, it’s that mobile matters. The company reported that 20 percent of overall traffic for Baidu services is mobile. Mobile traffic is up 25 percent quarter over quarter, and 110 percent year on year. But in order to capitalize on this shift, the company needs to develop a way to successfully advertise to mobile users. The difficulty of this task is highlighted by the struggles of companies like Facebook (NASDAQ:FB) to do the same thing.
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