Baidu Sees Confidence Boost After Google's China Threat

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After Google's threat last month to exit China, advertisers have become more confident in the search engine's main local rival, Baidu said Tuesday.

"What we have seen in the market is that our customers' -- our partners' confidence level in Baidu [is] certainly higher, and we think we would benefit from that," said Robin Li, CEO of Baidu, in a call on the company's newest financial results.

Baidu reported big rises in revenue and net income for the final three months of last year when compared to the period a year earlier. But the revenue figure was down slightly from the preceding quarter, and it forecast that revenue growth would remain almost flat in the first quarter of this year. The company did not factor in changes that may send more business their way, such as Google's plan to stop censoring search in China. Baidu also noted its switch to a new bidding system for advertisers, which dragged down its revenue in the last quarter, could keep affecting its results.

Google, which holds a distant second place behind Baidu in China's search market, last month said it plans to stop censoring results on its China-based search engine, even if that means being forced out of the country. Analysts have said the move could give a boost to other search engines in China.

Google did not immediately reply to a request for comment.

Baidu's switch to its Phoenix Nest ad system hit revenue less than expected in the last quarter, but more gains from the system may not come in until later in the current quarter, said Haoyu Shen, the company's senior vice president of business operations.

The switch hit revenue because the old ad system was discontinued when not all users may have been ready to change over. Baidu said it will keep working to educate advertisers on the new system.

"On one hand the transition is largely behind us… but on the other hand I think for some customers the learning curve is still steep," Shen said.

Baidu reported revenue of 1.26 billion yuan (US$184 million) for the final quarter last year, a rise of nearly 40 percent from a year earlier. Its net income was 428 million yuan, up nearly 50 percent from a year earlier.

But the figures both fell compared to the previous quarter, with revenue falling slightly and net income down 13 percent. Baidu forecast that its revenue would remain flat in the first quarter of 2010 at about 1.2 billion yuan.

Last year Baidu posted total revenue of 4.45 billion yuan and net income of almost 1.5 billion yuan. Both figures were up about 40 percent from 2008.

(IDG, the parent company of IDG News Service, is an investor in Baidu.)

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