According to iResearch, the Chinese search engine market grew 51% over the year during the last quarter to RMB 16.45 billion (~$2.67 billion). Internet search giant Baidu (Nasdaq: BIDU) remained the market leader in the country with 82.2% market share followed by Google China, Sougou, and 360 search. Mobile search is the leading segment in the country and revenues from mobile search are estimated to have improved 60% over the year to RMB 5.53 billion (~$0.9 billion).
Baidu’s third quarter revenues improved 13% over the year to RMB 13.52 billion (~$2.2 billion), falling short of the Street’s estimates of RMB 13.56 billion (~$2.12 billion). EPS of RMB 11 (~ $1.79) was higher than the market’s forecast of RMB 9.75 (~$1.59). Overall traffic acquisition costs for the company increased from 11.7% a year ago to 12.9% during the recently reported quarter.
Baidu attributed the increase in revenues to the rising adoption of mobile traffic. During the quarter, mobile devices generated 36% of the revenues and for the first time, mobile traffic outpaced PC traffic.
By segment, revenues from online marketing services grew 52% to RMB 13.4 billion (~$2.09 billion). Active online marketing customers for the quarter improved 11% over the year and 6% over the quarter to 516,000. Revenue per online marketing customer during the quarter grew 36% to RMB 25,900 (~$4,220). Revenue from other sources grew 112% to bring in RMB 92.6 million (~$0.1 billion).
For the current quarter, Baidu expects revenues to grow between 45.4%-49.6% over the year, compared with the market’s expectations of growth of 49%.
Baidu’s Latin American Expansion
Baidu plans to expand their presence outside of China. During the recent quarter, they took steps to establish themselves in Brazil, their first expansion outside China since they launched in Japan in 2007. Baidu released their Portuguese language version of their Hao-123 link-list website in July this year. They are strengthening their position in the country by recently announcing the acquisition of the control of Brazil’s Peixe Urbano for an undisclosed sum. According to research firm A.T. Kearney, the Brazilian e-commerce market is projected to grow 18% annually through the year 2016. Baidu hopes to access this high growth market through the purchase of the controlling stake.
Baidu’s New Partnerships
Meanwhile, within China, Baidu is expanding their presence through several strategic tie-ups, especially in the mobile space. Last month, Beijing-based smartphone maker Xiaomi announced their plans to invest $300 million in Baidu’s online video portal iQiyi.com. The investment in the portal is expected to be largely for content.
Baidu also announced a tie-up with Chinese e-tailer LightInTheBox. As part of the agreement, Baidu’s international mobile app subsidiary Baidu Dianxin will promote and distribute LightInTheBox’s products and apps on their portal. The move will help LightInTheBox reach out to a bigger market for their products and in return, Baidu Dianxin is hoping to improve their own app distribution.
Baidu is also growing their market share through the release of new services. The latest one to be released is Baidu Connect, which is a mobile app built for merchants to improve market leads, CRM system, and sales conversion. Baidu Connect account will help merchants reach out to new customers while maintaining relationships with existing ones. The app enables pull-through search and push-based search to let customers discover merchants through the mobile apps of Mobile Baidu or Baidu Maps. Baidu is pleased with the initial reviews that the product has received from their merchants.
The market is pleased with Baidu’s performance. Their stock is trading at $234.74 with a market capitalization of $82.33 billion. It touched a 52-week high of $251.99 last month.