Baidu’s Growth Spree Likely To Continue Into 2018

by Trefis Team
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Baidu (NASDAQ:BIDU) announced its Q4 and full year earnings on February 13, reporting a nearly 30% increase in net revenue to RMB 23.6 billion. The internet giant reported a solid 17% growth in revenues to RMB 61.3 billion ($9.3 billion) through the first three quarters of the year. Strong revenue growth was complemented by a similar improvement in the company’s operating income. We have summarized Baidu’s full year 2018 results on our interactive analysis platform, where we have also added our forecasts for 2018. You can modify our forecasts for revenues and margins to gauge how it would impact the company’s results for 2018.

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Key Growth Drivers

Strong growth in Baidu’s online marketing business was driven by an increase in monetization per customer, which increased 43% on a y-o-y basis to RMB 93,500 per customer for the year. Comparatively, the total number of customers fell over 30% to 775,000 customers. This is not a major concern for the company since most of the lost customers belonged to the businesses exited by Baidu through the year, which contributed to only 1% of revenue.

In recent quarters, Baidu witnessed strong adoption of its new technology among users, particularly Mobile Baidu 9.0, which launched mid-year. The product rebuild was also a key reason for a loss of online marketing customers. The refreshed flagship app focuses on enhancing user experience through faster loading and easier navigation, making it more like a mobile native app with “query-less” searches. The new app also has voice recognition searches, making it even easier for first time users to navigate. This helped boost the total daily active users (DAUs) on Mobile Baidu above 100 million in mid-2017, from around 80 million in the previous year.

In addition to strong growth metrics, the company’s profit margin improved significantly. Baidu’s operating profit surged 56% for the year to RMB 15.6 billion driven by limited increase in operating expenses. Resulting net income and diluted earnings per share for the year also increased 58-60% on a y-o-y basis to RMB 18.3 billion and RMB 52.41, respectively.

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