Baidu bets on purchases as its sees slow profit growth

Baidu Inc.

Baidu Inc.

Baidu Inc. released its data showing a surprising slowdown in profit growth in the first quarter. The company is grappling with its concerns over accelerating costs. Baidu Inc. has to face the music and learn how to make money in mobile services. In its attempts to do that, the China’s company is ready to expand by acquisitions while it is trying to make the best of the growing popularity of the omnipresent mobile devices.

Baidu faces tough quarter

On the 26th of April, Baidu Inc. released its quarterly results showing surprisingly slow profit growth. According to the figures issued by the China’s company, the slowest quarterly profit growth in nearly 5 years suffered from a substantial jump in traffic acquisition costs. The findings indicated that traffic acquisition costs for the three-month period generated more than 10 percent of total revenue.  This was around a 7.7 percent increase on a year-on-year basis. The China’s company admitted that the first quarter results were indeed disturbing, yet it was underlined that it believed to see improvement in the next quarter.

According to results released by Baidu Inc., its net income climbed approximately 8.5 percent to roughly 2.04 billion yuan (slightly over $330) on a year-on-year basis. More important, the noted net profit did not meet market projections of 2.2 billion yuan.

As for online marketing revenue, the company saw it surge staggering 40 percent to approximately 5.97 billion yuan, slightly below analysts’ expectations of 5.99 billion yuan. In addition, Baidu Inc. witnessed a 28 percent increase in its active online marketing customers who amounted to approximately 410,000.

Taking into consideration all above-mentioned figures, it is not surprising that Baidu Inc., which is the owner China’s largest Internet search engine, has been pondering over methods of luring more mobile customers.

Baidu eyes purchases

To improve its results, Baidu Inc. considers acquisitions as it believes that purchases  will be the best way of improving better performance. After a deliberate and long analysis, the company came to conclusion that acquisitions might save priceless time. However, Robin Lin, chief executive officer at Baidu Inc., has not given any details on potential acquisitions.

Certainly, future acquisitions will be aimed at bolstering the company’s performance as well as strengthening its dominance in the market. But we should not forget that Baidu Inc. eyes possible purchases as it aspires to win a share in mobile devices search market as well. Hence potential acquisitions of mobile applications would without a doubt widen the company’s range of  search products, making its service more attractive to customers.

The fact is that Baidu Inc. must discover and enter new grounds as analysts believe that visible shifts in consumer behavior might have a great impact on revenue. Therefore Baidu Inc.’s plans to win a bigger market share in mobile services are totally understandable.

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Richard Meryn
Richard Meryn, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

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