Baidu profit falls 4.5 per cent on higher costs

PUBLISHED : Thursday, 25 July, 2013, 11:16am
UPDATED : Thursday, 29 August, 2013, 4:13am

Baidu said on Thursday its latest quarterly profit fell 4.5 per cent to 2.6 billion yuan (HK$3.3 billion). Revenue rose 38.6 per cent from a year earlier to 7.6 billion yuan but promotion and other expenses rose 83.5 per cent.

China’s established competitors such as Baidu that focus on desktop computer-based services face new challenges as Web surfers shift to smartphones and tablets.

“The adoption of our mobile platform gained momentum and mobile monetization improved,” said Baidu chairman Robin Li in a statement. “Mobile revenues for the first time accounted for over 10 per cent of our total revenues this quarter.”

China’s population of internet users grew 10 per cent over the past year to 591 million people as of the end of June. The number of users who surf the Web on wireless devices rose at double that rate, climbing 20 per cent to 464 million. That growth rate was an acceleration over the previous year’s 18 per cent rise in wireless users.

The Communist government encourages internet use for business and education but tries to block access to material deemed subversive or obscene. The rise of Web use has driven the growth of new Chinese industries from online shopping and microblogs to online video.

Growth in mobile use has created openings for new competitors, forcing Baidu and other established companies to roll out new services.

To gain a bigger mobile foothold, Baidu announced this month it would pay US$1.9 billion for 91 Wireless Websoft, a distributor of smartphone apps.

“Our recent investments have further strengthened Baidu’s position in key strategic areas such as search, LBS, app distribution and online video,” said Li.

The company “will continue to invest aggressively”, said its chief financial officer, Jennifer Li.

Baidu dominates traditional Internet search in China with nearly 80 per cent of the market. But it faces tough competition in mobile search, where its market share has eroded.

Baidu’s mobile share declined to 66.9 per cent in March from 77.5 per cent last July. That followed the launch of a rival service in mid-last year by Qihoo 360, an information security company, which quickly gained a market share of more than 13 per cent.

In May, Baidu announced the purchase of Internet video service PPS Net for US$370 million. It said that, combined with the service it already owned, would make it China’s biggest mobile video platform by user numbers.