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Baidu Second-Quarter Profit Rises on Higher Ad Sales

Baidu Inc. (BIDU), owner of China’s most-used search-engine, said second-quarter profit rose 70 percent, beating analysts’ estimates, as the company increased advertising sales to new customers.

Net income climbed to 2.77 billion yuan ($434 million), or 7.86 yuan per American depositary receipt, compared with 1.63 billion yuan, or 4.67 yuan, a year earlier, Baidu said today in a statement. That exceeded the 2.5 billion-yuan average of 10 analysts’ estimates compiled by Bloomberg. Revenue rose 60 percent to 5.46 billion yuan.

Baidu added customers by stepping up marketing to smaller companies in China, countering a slowdown in the advertising market as economic growth weakens. Chief Executive Officer Robin Li is expanding in display advertising to customers including Procter & Gamble Co. (PG), and plans to add mobile users as more Chinese access the Web on smartphones.

“The smaller advertisers are helping the company,” Dick Wei, who rates Baidu overweight at JPMorgan Chase & Co. in Hong Kong, said before the earnings release. Still, “it’s the bigger customers who’ll drive growth,” Wei said.

Baidu fell 2.8 percent to close at $107.10 in Nasdaq Stock Market trading today before the announcement. The shares have declined 8 percent this year, underperforming the 46 percent gain in the Hong Kong-traded shares of Tencent Holdings Ltd. (700), China’s biggest Internet company.

Third-quarter revenue will be in a range of 6.25 billion yuan to 6.41 billion yuan, Baidu said. That compares with the 6.39 billion-yuan average of analysts’ estimates compiled by Bloomberg.

In the second-quarter, Baidu accounted for 78.6 percent of China’s search-engine market by revenue, compared with 15.7 percent for Google Inc. (GOOG), according to researcher Analysys International.

China’s online advertising market may expand by 39 percent this year to 65.1 billion yuan, slowing from 46 percent growth in 2011, according to a report by Nomura Holdings Inc. in June.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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