Baidu Q3 revenue exceeds projections, profits up 80 percent

Baidu said traffic growth and increased spending from advertising customers helped drive strong revenue

China's largest search engine Baidu reported that net profit in the third quarter was up 80 percent year-on-year, as the company saw strong growth in website traffic, and benefited from improvements made to its online ad services.

Baidu's net profits reached 1.8 billion yuan (US$295 million) in the quarter, up from the 1.0 billion yuan recorded in the same period a year ago. Revenue in the quarter was 4.1 billion yuan, up 85 percent from revenue in the same quarter last year. This topped the company's earlier projection of about 80 percent revenue growth.

Baidu saw a major increase in ad spending from e-commerce businesses in the quarter, with the growth exceeding 100 percent, said company CEO Robin Li during a conference call on Friday. More businesses that previously allocated their ad spending offline are now moving to Baidu, Li added.

The company has a 80 percent user share of China's Internet search engine market, with Google a distant second, according to CNZZ.com, an online analytics website. Baidu projects revenues in the fourth quarter will grow between 79.9 percent to 85 percent from the same period last year.

In September, Baidu launched a new homepage, offering users a customizable landing site to connect to their favorite online apps and sites, and see recent posts on their social networking platforms.

User adoption of the new homepage has been "healthy", Li said, without providing specifics. But the new homepage will have a slightly negative impact on revenues as users searches will be less, Li said. "The new homepage is stickier. We hope going forward users will stay longer on Baidu," he said.

Also in September, Baidu unveiled a set of developer tools that analysts have said will lay the ground work for a company-backed mobile operating system. The Android-based developer tools, called Baidu Yi, will first be used to create mobile apps integrated with the company's existing products including its music, e-reading and mapping services. But the Yi platform will eventually also feature a user interface for consumers.

During Friday's conference call, Li said Baidu Yi will bring more of the company's services to China's mobile users. "Once devices feature our platform in the mass market, Baidu Yi will give easy access to the search box, music streaming, Baidu Maps and a growing number of Web-based apps," he said.

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