Baidu enjoys 60% rise in Q2 revenues

Chinese Internet search giant Baidu Inc on Tuesday reported higher-than-expected second-quarter revenue, boosted by small and medium-sized advertisers.

The company also said it is likely to go ahead with more acquisitions to beef up its presence in emerging sectors, such as mobile Internet.

Baidu had 5.46 billion yuan ($858 million) in revenue in the second quarter, up nearly 60 percent from the same time last year, it said.

"Our efforts to expand our customer base continue to make solid progress," said Robin Li, Baidu's chairman and CEO.

The Beijing-based company accounted for more than 78 percent of China's search-engine market by revenue, compared with 15.7 percent for Google Inc, according to data from Analysys International.

Baidu launched a promotion campaign in about 100 Chinese cities in the second quarter in a bid to lure more SME advertisers.

The company had about 352,000 active online advertisers in the second quarter, a 9.7 percent increase from the previous quarter, it said. Baidu's Web-based advertising service generated almost the entirety of its revenue.

Baidu is not alone in bidding for advertisements from SMEs.

Jike.com, a homegrown Internet search engine which is partially-owned by the People's Daily newspaper, said in June that it plans to provide free advertising services to up to 1,000 SMEs over the next three years, in a bid to expand its customer base.

"We are ready to face the challenges after announcing our marketing strategy," said Deng Yaping, president of Jike.com.

However, more serious challenges may come from the fast-growing mobile Internet sector where Baidu is a newcomer.

The mobile Internet's user base reached "substantial scale" with about 160 million third-generation network subscribers by April, said a Goldman Sachs report released in June.

Its analysts estimated that the number of Baidu's mobile queries will triple in 2012 compared to last year, accounting for 43 percent of its total queries by the end of 2014.

"The consequent significant shift in online user activity from desktop to mobile devices therefore makes Baidu's mobile strategy critical to its longer-term growth and competitive positioning," said the report.

However, some analysts said that Baidu's M&A strategy might not be vigorous enough.

"Compared with Google Inc's 113 mergers and acquisitions with amounts totaling $20 billion to $30 billion last year, Baidu's acquisition strategy is not forward looking enough, and to some extent affects its future development," said Mike Chen, an analyst at China Merchants Securities (HK) Co Ltd.

Baidu could also face bigger challenges in emerging sectors including vertical search, e-commerce, cloud computing and mobile Internet, Chen said.

Baidu's Li indicated in a conference call on Tuesday that he may make stronger efforts to support the company's team in emerging business sectors, and did not rule out acquisitions.

"In most cases, I would say that I prefer to buy than to build," Li said. "But there are just not good enough applications, services or products for us to buy, so we have to build."

Meanwhile, Li said he doesn't see emerging businesses making money anytime soon.

The mobile Internet is in its early stages, and it does not have enough content available for users to search, so mobile users are not as dependent as desktop users on Internet search engines, Li said.

Baidu's Nasdaq-traded shares dropped more than 20 percent over the last quarter amid sluggish performance across the industry, data from the financial website CNNMoney showed.

However, US analysts have a 12-month median price target of $180 on the company, which represents a 68 percent increase from its latest price of $107.1, according to the website.

gaoyuan@chinadaily.com.cn