Baidu Chasing Alibaba to Mobile May Miss Sales Estimates

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Baidu Inc. sales may fall short of some forecasts in the current quarter amid competition with Alibaba Group Holding Ltd. for shoppers among China’s more than 500 million mobile Internet users.

Sales in the fourth quarter will grow more than 45 percent from a year earlier, to a range of 13.85 billion yuan ($2.3 billion) to 14.25 billion yuan, Chief Financial Officer Jennifer Li said on a conference call today. That compares with the 14.1 billion-yuan average of 10 analysts’ estimates compiled by Bloomberg.

Baidu’s billionaire founder Robin Li is investing in services, such as Baidu Connect, to help shoppers find brick-and-mortar stores and retrieve product information on smartphones and tablets in a challenge to Alibaba. While those efforts will encourage more searches, they won’t add much to sales over the next 12 to 18 months, Li, the company’s chairman and chief executive officer, said on the call.

“We have this vision that in the PC era, search was trying to connect people with information, but in the mobile age the goal of search is to connect people with services,” he said on the call. “In order to achieve that goal, to realize that vision, we need to build our capabilities.”

Revenue in the third quarter climbed 52 percent to 13.5 billion yuan, the Beijing-based company said in a statement yesterday. That compared with the 13.6 billion-yuan average of 12 analysts’ estimates compiled by Bloomberg.

‘Internet Ecosystem’

Net income rose 27 percent to 3.88 billion yuan in the three months ended September, compared with the 3.46 billion-yuan average of eight analysts’ projections compiled by Bloomberg.

“We are pleased with the results,” Jiong Shao, an analyst at Macquarie Group Ltd., said by e-mail today. “We are most encouraged by Baidu’s ever strengthening positioning in building a mobile Internet ecosystem.”

China had 527 million mobile Internet users as of the end of June, according to the China Internet Network Information Center.

Baidu got 36 percent of its sales from mobile searches in the third quarter, and for the first time mobile search surpassed desktop searches for the quarter, Robin Li said today.

Baidu shares rose 5.6 percent to $237.01 at the close in New York.

Shopping Ads

The company in August joined Dalian Wanda Group, China’s biggest commercial land developer, and Tencent Holdings Ltd. in an online shopping venture to challenge Alibaba Group Holding Ltd. In September, Baidu agreed to invest in mapping company IndoorAtlas Ltd., which allows users to find their way through malls and office buildings.

The goal is to help sell more advertising by connecting users of mobile devices with nearby brick-and-mortar businesses.

The company is investing in new interfaces to simplify mobile search. Voice and image recognition will account for about half of searches within five years, Li said last month.

On the earnings call today, Li said Baidu is well-positioned to capture more mobile search traffic and must decide how aggressively to make money from it.

In China, the company accounted for 76.2 percent of search engine queries in the second quarter, according to Bloomberg Intelligence. Qihoo 360 Technology Co. was second with 16.5 percent, and Sogou Inc. was third with 4.9 percent.

— With assistance by Edmond Lococo

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