Baidu struggling on earnings
Baidu, which was established in 2000, is the leading search engine platform in China (replacing Google which is censored since 2010). The largest Chinese search engine accounts for more than 80% of the market share, it recorded its worse quarter in terms of profit in over 11 years.
-34% net income for Baidu
They issued a report of their second quarter earnings, the net income dropped by 34%. Although they remain profitable with a net income of $363.2 million. Nevertheless, this profit is dropping quarter over quarter as the company is witnessing more and more scrutiny over its search and practices. The Wall Street Journal reported that Baidu’s “advertising practices came under scrutiny after the death of a young man who undertook a cancer treatment he found through a Baidu online ad”. The journal added “Shares in the company have fallen nearly 15% this year, and Baidu lowered its revenue forecast by nearly 10% ahead of its earnings report Friday in Asia.” Baidu has encountered growth issues, although some other figures are still fairly good (please read below).
- Mobile search monthly active users (MAUs) were 667 million for June 2016, an increase of 6% year- over-year.
- Mobile maps MAUs were over 343 million as of June 2016, a growth of 13% in about a year.
- Gross merchandise value (GMV) for Transaction services totaled $2.7 billion for Q2 2016, a strong increase of 166% year-over-year.
- Number of active Baidu Wallet accounts reached 80 million at the end of June 2016, yet another strong increase of over 131% year-over-year.
- Still, the company’s total revenues for the second quarter of 2016 were $2.7 billion, a 10.2% increase from the corresponding period in 2015 and a 16.3% growth year-over-year.
- Mobile revenue represented 62% of the total revenues for the Q2 2016, 50% in 2015. Net income in the second quarter was $362.2 million, a 34.1% drop from the same period in 2015.
Any other local search engine can replace the firm in the near term
Morningstar analyst Marie Sun declared “Although Baidu is facing a public relations crisis, we don’t think any other local search engine can replace the firm in the near term”. She furthered her analysis “As long as the Chinese government keeps Google out of mainland China, we believe Baidu will maintain its leading position”.
The company issued their outlook for the coming years, stating that they are expecting total revenues ranging from $2.714 billion to $2.796 billion for Q3 2016.