Why Baidu focuses on mobile as its Q4 top-line grows fast

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A look at Baidu’s Q4 and fiscal 2013 results

China’s leading search engine, Baidu (BIDU), announced its Q4 2013 and fiscal year 2013 results recently, in which its revenues for the fourth quarter saw a 50% increase from the corresponding period in 2012. Revenues increased from $1.02 billion in Q4 2012 to $1.57 billion in Q4 2013. In its press release to announce the results, the company mentioned that the number of active online marketing customers in Q4 increased to 451,000, representing a year-over-year increase of 11%, while the revenue per customer increased to $3,452—a year-over-year increase of 35%.

Chinese Internet User

Mobile contribution is on the rise

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According to Baidu, mobile accounted for more than 20% of its total revenues in 4Q—up from 10% six months ago. Mobile search has become an important component for not just Baidu, but also its competitors Google (GOOG) and Microsoft (MSFT). Google’s Android operating system has a global share of about 79% in the smartphone OS market, according to IDC. This means it directly benefits through increased mobile searches, as Google is the default search engine on all Android smartphones. Microsoft’s Windows Phone has a market share of just 3% in this market (which includes the Nokia’s (NOK) mobile devices acquisition it did last year), and so doesn’t benefit much from increased mobile search.

Baidu’s management was quite happy with the increased mobile usage. Jennifer Li, Baidu’s chief financial officer commented,

“We delivered solid top line growth in 2013, and the increasing revenue contribution from mobile over the last several quarters has been especially encouraging”. “Our investments helped to lay a strong foundation for sustainable growth across our business. Looking ahead, we will continue to expand the Baidu platform and invest aggressively in R&D, sales and marketing and infrastructure during this crucial period of market transformation.”

Mobile internet use in China has been increasing fast. According to data released by Pew Research Center, by mid-2013, about 591 million people in China were using the Internet, out of which about 79% accessed the Internet via their mobile phones.

Baidu is looking to expand through acquisitions too

Baidu has foreseen the mobile Internet boom, which is why in the last few quarters, it hasn’t only focused on increasing its revenues organically, but also through acquisitions. Baidu acquired 91 Wireless Websoft, China’s most popular third-party store for smartphone applications, for $1.85 billion in August last year. It also acquired video business PPStream for $370 million and entered into an agreement for a majority stake in e-commerce website Nuomi Holdings for about $160 million last year. These acquisitions are the result of the aggressive strategy to take on competitors such as Alibaba Group Holding and Tencent Holdings.

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