Marbridge Daily

<- April 25, 2012 ->

Baidu on Reasons for Lower Q2 2012 Revenue Guidances

Sohu IT, 4/25/12

During Baidu's Q1 2012 earnings conference call, in response to Baidu's expected slowdown in Q2 revenue growth, company CFO Jennifer Li commented, "The rapid growth we saw in Q2 2011 was an exception; at the time, several sectors, such as group buy, were developing very rapidly in China, leading to an influx of hot money. Last year, real growth in the second quarter was 40%, exceeding our expectations. Our business outlook for Q2 2011 in last year's first quarter earnings report was quarter-on-quarter growth in the range of 32% to 35%, not much different from our outlook this year."

In response to the question of which five customer industries saw the best performance for advertising, Li reported that in the first quarter, the top five sectors were health care, machinery and equipment, education, tourism, and software and gaming. Li explained, "Q1 is a unique quarter, so the top five ad sectors saw a corresponding change; in the past, business services and franchises have been listed in the top five. However, the change this Q1 was not significant, and relatively consistent growth can still be expected in the two areas in the future. Additionally, growth in the B2C sector was robust as always, beating out B2B sector growth."

With regard to how Baidu plans to go about attracting small and medium enterprise clients going forward, CEO Robin Li disclosed that every year, the company invests in nationwide promotional initiatives, and that this year it has developed new incentives for its sales staff, encouraging them to pursue more customers. Last year the company also made structural adjustments to its sales team, splitting it into marketing and telemarketing divisions such that the former would be responsible for personal client meetings while the latter would focus solely on phone marketing, in an effort to increase overall efficiency. Last year, due to the rapid increase of customer volume, not enough resources could be allocated to smaller-enterprise customers, but this year Baidu has begun to direct more attention to clients in China's second and third-tier cities.

In terms of mobile search, Li commented, "Baidu's present situation is this: in most cases, in order to pre-install Baidu onto handsets such that it is the default search box, we need to share revenues with mobile phone manufacturers and other distribution channels. The current profitability of mobile search is thus much lower than that of PC search. We have in fact already begun to see profit nonetheless, and future revenue potential is expected to continue to grow, but within the year, the proportion of total revenue is still likely to be very low."

Li also reported that mobile search traffic now accounts for close to 20% of Baidu's total web search traffic. The company has continued to explore monetization for mobile, such as mobile account management for Baidu’s Phoenix Nest search advertising platform, mobile ad display presentations, and mobile backend monetization technologies.

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