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Baidu’s Booming Digital Advertising Business

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Advertising prospects

Baidu’s (BIDU) recovery is almost complete. For Baidu, the crackdown on bad health ads a few years ago resulted in a loss of advertisers and advertising revenues. The company has been working to recover. Baidu’s efforts are starting to pay off.

In the fourth quarter ending in December, Baidu’s advertising revenues increased 10% year-over-year to $3.1 billion. The company added more advertisers during that period. Baidu closed the December quarter with 529,000 active advertisers—up from 522,000 at the close of the September quarter. The company had 460,000 active advertisers on its platforms at the beginning of last year.

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Advertising contributes 78% of Baidu’s revenues

For Baidu, growth in the advertising business is important. The advertising business accounts for most of Baidu’s total revenues. The advertising business contributed 78% of Baidu’s total revenues in the fourth quarter. Advertising accounted for 76% of Yandex’s (YNDX) total revenues. Yandex is the top search engine company in Russia. Advertising accounted for 83% of Google’s revenues (GOOGL) and 87% of Twitter’s (TWTR) revenues in the December quarter.

Although Baidu attracted more advertising expenditures and added advertisers in the December quarter, the company is still facing competitive pressure in China—its domestic and largest market. Baidu’s greatest threats in China are Alibaba (BABA) and Tencent (TCEHY), which boast a significant digital reach with their e-commerce and social media platforms. Alibaba e-commerce platforms reach more than 600 million consumers across China. As a result, Alibaba is an attractive advertising platform for consumer brands. Tencent’s WeChat boasts over one billion users.

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