Success 'not directly connected' with Google's exit from mainland: CEO

2016-02-15 08:58Global Times Editor: Li Yan

Baidu faces challenges as users, sources of revenue go mobile

Robin Li Yanhong, chairman and CEO of NASDAQ-listed domestic Internet giant -Baidu Inc, said in a CCTV document released Sunday that his company's success has no direct connection with Google Inc's withdrawal from the Chinese mainland market.

In an interview in a documentary broadcast on State-run China Central Television (CCTV), Li said that notion is a misunderstanding, and he seeks to clarify it on every occasion because he "cares."

"People should remember that Google operated and competed in the local market for five years before its exit [from the Chinese mainland market]. In this period, it saw its market share continuously declining on a yearly basis, in contrast to Baidu's rising market share," Li told CCTV.

Google relocated its servers from the mainland to Hong Kong in 2010. Google has reportedly been hoping to get back into China via Google Play, the app store for its Android mobile operating system, according to a Reuters report in September 2015.

Global Times' efforts to reach Google failed on Sunday.

Li Donglou, an Internet industry observer, told the Global Times Sunday that when Google left, Baidu - like many other local firms - knew local customers better.

However, several years after Baidu's triumph over Google as the leading search results provider in China, the Chinese company itself is in a shaky position as the tide changes.

As more users migrate toward mobile Internet with the popularization of smartphones, analysts said, Baidu's dominant position as the leading search engine on the PC end is becoming less relevant in bringing in income for the company.

"It is the mobile age now. More people now just open an app and search for the most competitive restaurants nearby or for life services," Li told the Global Times Sunday. "In this era, Baidu's search service is out of the game."

This weakness is partly reflected by investors' valuation of the company, which stood around $54 billion.

This compares with Alibaba Group Holding's and Tencent Holdings' valuations of around $150 billion, according to media reports.

In the third quarter, which ended on September 30, 2015, Baidu posted operating profit of 2.51 billion yuan ($381.9 million), down 35.9 percent from the same period in 2014, according to the latest financial report released in October 2015.

Net profit for the quarter was 2.84 billion yuan, down 26.7 percent from 2014.

In September 2015, the number of mobile search monthly active users stood at 643 million, up 26 percent from a year earlier. Revenue generated on the mobile end accounted for 54 percent of the company's total revenue.

The company is due to release its fourth-quarter and full-year reports on February 26.

There have been unconfirmed reports that Baidu might delist from the U.S. market.

"The main channel of profit for Baidu is shifting from the traditional bidding for search results to its mobile services," Zhang Yi, CEO of Guangzhou-based market consultancy iiMedia Research, told the Global Times Sunday. "This will make its financial report look bad. This becomes one reason for the company to consider delisting from the U.S. stock market."

In a bigger context, Baidu has even more to worry about. Its rivals have been more successful in building up so-called ecosystems in which consumers are locked in by a loop of services.

For instance, Tencent invested in online retailer Inc and in online booking and discount platform operator Meituan-Dianping. It has also cooperated with search service provider Sougou.

Baidu has its own offerings, including the backing-up of group-buying site Nuomi and US-based car-hailing service provider Uber. It has also set up its own mobile payment platform known as Baidu Wallet.

But these companies have a long way to go before becoming champions in their respective fields.


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