Updated: 30th April 2017

China’s largest search engine, Baidu, struggles on earnings

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Baidu, China’s largest search engine with over 80% of marketshare in that country, has had it’s worse quarter in terms of profit since their IPO over 11 years ago.

In their Q2 2016 earnings report their net income dropped by 34% from the previous period. They still are very profitable, showing a net income of $363.2 million but that profit continues to drop quarter over quarter as the company sees more and more scrutiny over their search ad practices.

The Wall Street Journal reports Baidu’s “advertising practices came under scrutiny after the death of a young man who undertook a cancer treatment he found through a Baidu online ad.” “Shares in the company have fallen nearly 15% this year, and Baidu lowered its revenue forecast by nearly 10% ahead of its earnings report Friday in Asia,” they added.

Growth has been an issue for Baidu but here are the highlights the company wants you to read:

  • Mobile search monthly active users (MAUs) were 667 million for the month of June 2016, an increase of 6% year-over-year
  • Mobile maps MAUs were 343 million for the month of June 2016, an increase of 13% year-over-year
  • Gross merchandise value (GMV) for Transaction Services totaled RMB18.0 billion ($2.7 billion) for the second quarter of 2016, an increase of 166% year-over-year
  • Baidu Wallet activated accounts reached 80 million at the end of June 2016, an increase of 131% year-over-year

The company’s total revenues in the second quarter of 2016 were $2.748 billion, a 10.2% increase from the corresponding period in 2015, and 16.3% year-over-year increase. While mobile revenue represented 62% of total revenues for the second quarter of 2016, compared to 50% for the corresponding period in 2015. Net income attributable to Baidu in the second quarter of 2016 was $363.2 million, a 34.1% decrease from the corresponding period in 2015. the compared reported.

“Although Baidu is facing a public relations crisis, we don’t think any other local search engine can replace the firm in the near term,” Morningstar analyst Marie Sun wrote in a recent note. “As long as the Chinese government keeps Google out of mainland China, we believe Baidu will maintain its leading position.”

The company shared their outlook for the future saying they expect total revenues in an amount ranging from $2.714 billion to $2.796 billion for the third quarter of 2016, representing a decrease of 1.9% to an increase of 1.1%, year-over-year.

Their stock was at $166 per share and dropped to a low of $157 after the earnings release was announced. It closed today at $159.60 a decrease of $6.03 or 3.64%.


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