Baidu bullish as surging online ads lift profit 71.5pc
Baidu, the country's top search engine, reported a strong first-quarter result and projected an even better second quarter as online advertising continued to surge on the mainland.
Profit for the three months to March grew 71.5 per cent to 146.6 million yuan (HK$163.73 million) as sales doubled to 572.7 million yuan from a year earlier. The company expected sales to increase further to between 780 million yuan and 800 million yuan in the second quarter, or up 94.4 per cent to 99.4 per cent from a year earlier, much better than a consensus estimate of 703 million yuan.
The result came despite a long Lunar New Year and severe snowstorms, said chief executive Robin Li.
Both customer numbers and average spending grew. The company has 161,000 subscribers, 43.8 per cent up from a year earlier. Each pays an average 1,200 yuan per month, a 44 per cent increase from the same period last year.
During the first quarter, Baidu signed an agreement with China Netcom, the country's second-largest fixed line and internet services provider, under which China Netcom users are redirected to a designed Baidu search page if they visit an incorrect or nonexistent internet address.
'This will raise Baidu's traffic and market share in the search engine market,' said Dick Wei, a China internet analyst with JP Morgan.
Baidu led the mainland search engine market with 60.1 per cent market share, according to Beijing market research firm Analysys. Google had 25.9 per cent and Yahoo China 9.6 per cent.
Earlier, Google signed an exclusive contract with the country's leading mobile operator, China Mobile, for a mobile search service. Google expected that search traffic processed through Chinese mobile-phone users will surpass that by personal computers by 2011.
'China's mobile search is still at the very early stages,' Mr Li said.
While Baidu has not signed any special contracts with key mobile operators, its services through the wireless application protocol, is the country's most popular search engine among mobile users, he said.
Baidu's Japan operation, however, is dampening the overall result. Japan-related costs amounted to US$4.3 million in the first quarter. The company will invest up to US$25 million this year. However, no significant Japanese revenue is seen until next year.