Baidu has been dropping in growth despite its increase in revenue due to its heavy investments in O2O. (Photo : Reuters)
Baidu Inc.’s efforts of expanding its line of business from online to offline services had proven to be a challenge, as the company’s shares dropped to $181.50 (down 8.17 percent) in extended trading on Monday.
Baidu, the biggest Chinese-language Internet Search Provider (ISP), revealed its current quarter revenue forecast which fell short of financial analysts' estimates. As search advertising has been the company's bread and butter, the current technological shift made search business less profitable on smartphones than on computers.
The rise of mobile Internet consumers in the country had prompted Baidu to spend $3.2 billion in offline services, which would allow mobile internet users to access offline facilities, such as finding dining deals, purchasing movie tickets, as well as using its maps and e-wallet service (Baidu Wallet).
According to Summit Research analyst Henry Guo, the company is not at ease in giving an optimistic guidance due to weak visibility of these new ventures. Still, the present forecast positions Baidu in a positive view, with a rise in current quarter revenue from 34.4 percent to 37.4 percent. This leads to a revenue range of 18.17 billion yuan ($2.93 billion) to 18.58 billion yuan.
Despite the rise in revenue, the estimates were still lower than analysts' average predictions of 18.79 billion yuan, as stated by Thomson Reuters I/B/E/S. Expenses surged in the second quarter (ended on June 30th) as a result of the company's efforts to build up and promote these new ventures.
Other operating expenses also increased; selling, administrative and general expenses rose to 81 percent primarily due to marketing efforts for O2O. On the other hand, R&D expenses went up 56.2 percent, as the company hired more employees.
Baidu's net revenue jumped to 16.58 billion yuan (38.3 percent), narrowly hitting analysts' estimates of 16.57 billion yuan. The company earned 10.19 yuan per American depositary share, which is far lower than financial analysts' prediction of 10.58 yuan.
