Most people outside China have yet to perform a Baidu search, but inside the country it has become as indispensable as Google when it comes to looking for information online. Baidu’s latest results, however, show that revenues from its internet search business are falling compared with its hottest property: Video streaming.
Baidu Inc reported better-than-expected third-quarter profit and revenue as more people signed up with the company’s video streaming platform iQIYI, sending the Chinese search engine company’s shares up five percent after market hours.
Baidu has been trying to reduce its dependence on its core search business, which accounts for three-quarters of the company’s revenue. The company has had limited success so far with its cloud services and artificial intelligence businesses, but its listed subsidiary iQIYI, a Netflix-like video service, is popular with young people.
Third-quarter revenue from iQIYI, which competes with Alibaba-backed Youku and Tencent Holdings’ Tencent Video, rose nearly seven percent from a year earlier to 7.4 billion yuan ($1.06 billion), as the service crossed 105.8 million subscribers in September. IQIYI’s shares rose four percent in extended trading.
A relatively new bet – offering mini-programmes within the Baidu App to boost traffic – is gathering steam as well. Traffic to the app surged 25 percent in the third quarter, the company said in a statement.
“The changes we initiated this year are paying off,” Baidu Chief Executive Robin Li said in an internal letter reviewed by the Reuters news agency.
But revenue from Baidu’s core business fell three percent in the quarter which ended on September 30, weighing on overall sales that were flat from a year earlier at 28.08 billion yuan ($4bn) but ahead of the analyst estimate of 27.49 billion yuan ($3.92bn), according to data provider Refinitiv.
Baidu reported a net loss of 6.37 billion yuan ($909m) in the quarter mainly due to losses from the company’s equity investments, versus a profit of 12.40 billion yuan ($1.77bn) a year earlier.
Baidu, like other Chinese internet companies, is dealing with tightening regulation even as the overall economy slows.
These issues were weighing on Baidu’s revenue, Li said on a post-earnings call.
“These things, I think, will be temporary and we also think that the macro environment is stabilising. We do think that eventually, revenue will catch up with traffic,” he said.
Baidu, whose search engine dominates the market in China, forecast fourth-quarter revenue between 27.10 billion yuan ($3.87bn) and 28.70 billion yuan ($4.10bn). Analysts expect 27.52 billion yuan ($3.93bn).