Advertising helps Baidu beat expectations

Baidu almost doubled its revenue and saw a 171 per cent jump in net earnings in the fourth quarter of 2010 as Google’s partial retreat from China allowed the country’s largest internet search company to pick up more large online advertising customers.

Revenue in the three months to December 31, 2010 was Rmb2.451bn (US$371m), up 94.4 per cent from a year earlier, and net income jumped to Rmb1.161bn, the company said. The announcement drove its Nasdaq-listed shares up 7.6 per cent in after-hours trading on Monday in the US.

The strong performance, which beat both analysts’ expectations and the company’s own guidance, is partly driven by Google’s move early last year to redirect mainland Chinese online search users to its Hong Kong website to avoid the need to self-censor search results.

Google’s share of Chinese internet search revenues has since dropped dramatically. According to Analysys, the Beijing-based internet research firm, it hit 19.6 per cent in the fourth quarter, the first time to drop below 20 per cent since early 2007. Baidu’s market share hit a new high of 75.5 per cent.

Baidu said it was increasingly picking up larger companies as customers, whose willingness to spend more on online advertising was boosting its earnings. Revenue per online marketing customer for the fourth quarter grew 56 per cent from the same period in 2009, the company said.

Baidu expects to continue growing at the same pace in the current quarter. It forecast revenues of Rmb2.38bn (US$360.6m) to Rmb2.45bn for the three months to March 31, an increase of 83.9 per cent to 89.3 per cent over the same period last year.

With 457m internet users as of the end of December, China has the world’s largest online population. Over the past year, local clones of social media websites like Twitter and Facebook, which are blocked in China, have started growing exponentially. Sina, which operates China’s largest microblog, and Renren, the country’s largest Facebook clone, are both cranking up monetisation of their user bases by promoting social media advertising.

Baidu, which also runs online bulletin boards and other social media services, said it would keep an eye on social media’s role in the online ad market. “I realise that the commercial value of this product is also very meaningful,” said Robin Li, chief executive. “But the main purpose [of our social media services] is to solidify our position as a centrepiece of the Chinese online experience. Among the search engines in the world, we’re already the one with the strongest social flavour.”

Mr Li also said Baidu was eventually likely to let Qiyi, the company’s online video subsidiary, go public. “It is an independent company. So we would consider that,” he said. Qiyi has been online for less than a year but has quickly gained market share. The video company’s executives have indicated that they expect a listing two or three years from now.

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