Baidu has posted a surge in its O2O service transactions, earning 60.2 billion yuan in the third quarter, compared with 40.5 billion yuan in the previous quarter. (Photo : REUTERS)
China’s Internet search giant Baidu is likely to pursue plans to transform amid the rapid growth of its heavily invested online-to-offline (O2O) business, the China Daily reported.
The report said that the company registered an operating profit of 2.51 billion yuan ($395.2 million) on Friday, Oct. 30, a 35.9 percent drop from the same period a year earlier, mainly due to investments made on its O2O business as it moves away from the traditional search advertising business.
The company reported a surge in its O2O service transactions, at 60.2 billion yuan in the third quarter, compared with 40.5 billion yuan in the previous quarter, mostly from group-buying site Baidu Nuomi, takeaway delivery site Baidu Waimai, and online travel agency Qunar Cayman Islands Ltd.
Jennifer Li, chief executive officer of Baidu, called the quarter a "solid" one. "The momentum in transaction services gives us the confidence to continue investing," she said.
Li added that the company will invest in ways that leverage and reinforce the company's competitive advantage.
Yin Sheng, an independent analyst who specializes in Internet research, said that although Baidu's profits have been affected when it transformed into an O2O business, it continues to be one of the fastest growing Internet companies in China.
Baidu said in June that it would invest 20 billion yuan on its group-buying site Nuomi to transform itself into an O2O service platform, where mobile Internet users can book or take offline services, such as cinema tickets, taxi bookings or meals at restaurants.
Yin said that Baidu is on its way to make a business transformation as the company's total revenue in the third quarter rose to 18.4 billion yuan, a 36 percent increase year-on-year.
Baidu also entered into a deal to take a 25 percent stake in online travel agency Ctrip.com International Ltd., making the company the biggest player in China's online travel industry, an important sector for O2O services.
Analysts said that the deal is expected to cut Baidu's costs in supporting Nuomi's online travel business.
Yan Honghui, an analyst with Internet consultancy Analysys International, said that Baidu is expected to benefit from the Ctrip-Qunar deal and boost its profits in the next quarter.
"The O2O sector is a cash-burning sector with investors pouring money to offer incentives to get users," Yan said.
According to the report, China's O2O sector is expected to become a 10-trillion-yuan market in the future.
Yan said Baidu's decision to transform into an O2O business comes from its desire to achieve greater growth in the future as traditional search advertising business started to show signs of slowing growth.
