Baidu still on track with plans to transform

The company's total revenue in the third quarter rose 36 percent year-on-year to 18.4 billion yuan, Yin said, adding that Baidu is well on its way to make the business transformation.

The financial report came days after Baidu announced a deal, which saw it take a 25 percent stake in online travel agency Ctrip.com International Ltd. The deal makes the Nasdaq-listed company the biggest player in China's online travel industry, an important sector for O2O services.

Analysts expect the deal to cut Baidu's costs in supporting Nuomi's still-in-red online travel business.

Yan Honghui, an analyst with Beijing-based Internet consultancy Analysys International, said Baidu is expected to benefit from the Ctrip, Qunar deal.

"The O2O sector is a cash-burning sector with investors pouring money to offer incentives to get users," she said, adding the deal is expected to boost Baidu's profitability in the next quarter.

The O2O sector that provides people with location-based services is expected to be a 10 trillion yuan market in China in the future.

Yan said the decision to transform into an O2O business comes from Baidu's desire to achieve stronger growth in the future as its traditional search advertising business has seen signs of flattening.

"Baidu used to be a company that matched information with search requests. Now it wants to get closer to end users by matching services directly with search requests," she said, adding the transformation can also leverage the strength of Baidu's existing businesses, such as its map and payment services.

Though many of China's O2O companies, especially the smaller ones, have become bankrupt due to fierce competition, unclear business models and huge investment programs, it seems Baidu remains on strong ground.

Statistics from Analysys International showed that Nuomi's market share in the group-buying industry has grown from less than 10 percent in the first quarter to about 20 percent in the third quarter.