The Secret behind Internet Giant Baidu's Growth Stimulation
Marketing: the primary driver
In February 2016, Chinese search engine giant Baidu (BIDU) revealed its financials for fiscal 3Q15. The market reaction was positive as investors drove the company’s stock price up by 10% in after-hours trading. Baidu has also continued to explore and gain excellence in other businesses—for example, in its streaming video, maps, and O2O (online-to-offline) services—apart from its core online search business.
Baidu generated revenues of 64 billion yuan, or about $9.9 billion, in 2015 as compared to 48 billion yuan, or about $7.4 billion, in 2014—an increase of 35.3%. The majority of the company’s revenues were driven by the online marketing activities, which constituted 96% of the total revenues in 2015.
Baidu has been a center of attraction for Chinese users (MCHI), which has provided marketers a strong platform for capitalization. Baidu had around 1 million marketing customers in 2015—an increase of 29% YoY (year-over-year)—while Facebook (FB) had around 3 million advertisers in 2015.
Baidu (BIDU) constitutes 1.0% of PowerShares QQQ (QQQ).
Mobile search and mobile maps
China’s Internet penetration is around 50%, but the number of Internet users is huge—there are more Internet users in China, by comparison, than there are people in the United States. But unlike Google (GOOG), Baidu doesn’t yet have global reach, and so the growing number of potential users from Chinese urban and rural areas poses vast business opportunities for the company.
Also, as Internet penetration in Chinese rural area increases, this should fuel smartphone use and wireless connectivity, allowing more users to gain access to the Web. During its most recent quarter, Baidu’s mobile MAUs (monthly active users) stood at 657 million for the month of December 2015, an increase of 21% YoY.
In 2012, Baidu’s online mapping market shares stood at 19.1% compared to 70% currently. Baidu’s mapping service should benefit from the growing use of mobile services. Half of China’s private cars—approximately 150 million—use Baidu Maps for navigation. Baidu’s mobile maps MAUs came in at 302 million in December 2015, an increase of 43% YoY.
Now let’s see what analysts are saying about Baidu.
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