China's Baidu Revenue, Profits up on Strong Traffic Growth

China's largest search engine, Baidu, reported strong revenue and profit growth in the first quarter, driven by "solid traffic growth" and measures to generate more revenue from the company's sites.

Its search engine is already the default for 80 percent of Android phones in China. The company is now testing its own browser, and offers a beta version of its microblogging site as it pursues new opportunities in the country.

Baidu, which operates in a country with 457 million Internet users, reported on Thursday that net profits for the quarter ended March 31 were US$164 million, up by 123 percent from the same quarter last year. The company's revenue for the quarter was $372 million, up 88 percent from the same period last year.

The company expects revenue in the second quarter to be in the range of $493 million to $504 million, a year-on-year increase of up to 72.4 percent.

Baidu currently has a 75.8 share of China's search engine market, according to Beijing-based research firm Analysys International. Google is a distant second with a 19.2 percent share.

The company expects further growth, as search is now the most used Internet service in China, CEO Robin Li said during a conference call on Thursday.

According to the China Internet Network Information Center, search became the top service in 2010, with about 82 percent of the country's Web population using it. Online music is ranked second with 79 percent of the country's Internet users.

Baidu is also expanding its presence in mobile phones. Android is developed by Baidu's rival Google, but the mobile operating system is open-source software, allowing handset manufacturers to make changes to it. Baidu has been able to pre-install its search service on Android mobile phones through "revenue sharing agreements" with device makers.

Even as search remains Baidu's core service, the company has been including social networking features in its platform, Li said. Both analysts and Internet firms have identified Twitter-like microblogging as the next big Web service to hit China.

The company recently introduced a feature to its Baidu search engine, allowing users to directly post from the search page to third-party microblogging sites. In addition, the company has a beta version of its own microblogging platform at Baidu Talk.

Baidu also reported growth with Qiyi.com, the company's video sharing site. The video site now has more than 150 million monthly unique users, just one year after its launch, Li said. "This is by far a record for online video sites," he added. Qiyi operates as a video site that hosts licensed videos, much like Hulu does.

In comparison, Youku, China's largest video sharing site, reported last October that 230 million users visit the site on a monthly basis.

Baidu has also been eyeing China's web browser space. The company is currently testing out its own browser that's customized for Chinese users. "Having control of a browser would certainly drive traffic to Baidu search," Li said. "We would like to offer a better user experience with our browser."

Internet Explorer is used by about 83 percent of China's Web users, according to CNZZ.com, an analytical web research site.

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