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Baidu Profit Beats Estimates as Mobile Advertisers Lured

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Baidu's revenue increased to 9.5 billion yuan. Photographer: Brent Lewin/Bloomberg

April 25 (Bloomberg) -- Baidu Inc. posted first-quarter profit that beat analysts’ estimates as advertisers boosted spending to reach the growing number of people accessing China’s largest Internet search engine through mobile devices.

Net income rose 24 percent to 2.54 billion yuan ($406 million) from 2.04 billion yuan a year earlier, the Beijing-based company said in a statement. That beat the 2.1 billion-yuan average of eight analyst estimates compiled by Bloomberg. The stock jumped in late U.S. trading.

Baidu is developing applications for mapping and search services as it competes with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. for China’s 618 million Internet users. The company has attracted more advertisers through its video content platform IQiyi and travel site Qunar.

“Customer adoption of the mobile search product is really terrific,” Jennifer Li, Baidu’s chief financial officer, said during a conference call today. “Mobile revenue growth is really the strongest and fastest growth sector.”

Revenue increased to 9.5 billion yuan. That compares with the 9.53 billion-yuan average of 13 analyst estimates, and the company’s February projection of 9.24 billion yuan to 9.52 billion yuan in revenue for the quarter. Operating profit was 2.37 billion yuan, a 7.4 percent increase from a year earlier.

Advertising Revenue

Baidu shares closed at $159.74 in New York, up 0.3 percent. They jumped to $172.42 in extended trading.

The company’s average revenue per advertiser rose about 44 percent in the first quarter to 20,900 yuan, according to a statement.

“That revenue grew much faster than expected,” Echo He, an analyst at Maxim Group LLC in New York, said by phone. “It was able to maintain costs and also maintain strong traffic volume on search.”

The number of daily active users of mobile search reached 160 million, and the company expects mobile search to surpass personal-computer traffic this year, CEO Robin Li said during today’s conference call.

Selling, general and administrative expenses increased almost 137 percent to about 2 billion yuan, primarily because of an increase in promotional spending for mobile products, the company said. Baidu will focus on investing in its mobile applications for search, security and location-based services this year, curbing profit growth, Jennifer Li said during a February conference call.

The number of people who accessed the Internet via mobile devices reached 500 million in China by the end of December, according to latest available figures from the China Internet Network Information Center.

The company accounted for 76.9 percent of search engine queries in the nation in the fourth quarter, according to Bloomberg Industries. Qihoo 360 Technology Co. accounted for 15.1 percent, and Sogou Inc., in which Tencent owns a 36.5 percent stake, held 5.1 percent.

Baidu agreed in August to pay $1.85 billion for 91 Wireless Websoft Ltd., China’s most popular third-party store for smartphone applications. It also bought video business PPStream Inc. for $370 million last year and said it will acquire e-commerce website operator Nuomi Holdings Inc.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Lena Lee, Aaron Clark

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