More users, more problems

30 October 2014 By Robyn Mak Follow @mak_robyn

Mobile now accounts for half of its search traffic, but the Chinese search giant is grappling with how to turn users into revenue. Baidu has defied skeptics who thought it had missed the smartphone boom. But to deliver profit, it will need to keep sacrificing margins.

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Baidu, China’s largest search engine operator by user traffic, reported revenue of $2.2 billion in the third quarter of 2014, a 52 percent increase from the same period last year. Earnings increased by 27.2 percent from the same quarter last year to $632 million.

Selling, general and administrative costs almost doubled to $440 million from the third quarter last year, due to promotions for its mobile products. Mobile revenue now accounts for 36 percent of total revenue, up from 33 percent in the second quarter this year.

Baidu has been investing heavily in its mobile products since last year. It acquired the remaining shares it did not already own in Nuomi, a group-buying e-commerce service, in January.

Baidu also acquired 91 Wireless, a third party app distribution platform, for $1.9 billion, as well as PPS, a video streaming site for $370 million, in 2013. The company also bought a majority stake in travel search service, Qunar, which has since listed in the U.S., for $306 million.

Baidu’s Nasdaq-listed shares closed down 1.9 percent at the market close on Oct. 30.

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