Monday, July 30, 2007

iResearch Report on Baidu

iResearch analyst Tian Xing today released a research report (in Chinese) on Baidu's strong second quarter result, titled: "Three factors contributed to Baidu's wonderful second quarter result".

According to Baidu's second quarter earning report, revenue totaled 401.3 million yuan ($52.7 million). Year over year growth rate was 109.4% and quarter over qaurter growth rate was 46%. Net income was $18.6 million, an increase of 142.7% over the same period of last year.

Noticeably, there are large increases in two categories: One is the number of active customers jumped to 128,000, an quarter over quarter increase of 14.3%. The other is the average spending(AURP) reached $407.3, an increase of 24.0% quarter over quarter.

iResearch thinks Baidu's seond quarter result benefited from three major factors:

First, the good economic development environment surrounding the Chinese internet

China's special large number of over 30 million small and medium enterprises forms the huge fundamental power base for the commercial application of search engines. More and more businesses are realizing the effectiveness of using Baidu as a marketing platform. Combining with the maturing of the marketing skills of the search engines themselves, the overall environment is promoting the rapid development of search marketing.

Second, successful localized search products increased the traffic

The data from iReseach's iUserTracker indicates, Baidu's traffic increased significantly both from home and office online users. Monthly total visits reached 1.85 billion times, a big increase from first quarter's 1.6 billion. At the same time, time spend per visit also increased to 37 min from first quarter's 30 min. Especially, the two-year old Baidu Zhidao(answers service) is gradually becoming a very sticky online community. During second quarter, visits to Baidu Zhidao reached 400 million, with average visiting time of 13 min, and contribute significantly to the overall traffic.

Third, the beefing up of direct sales force is helping convert potential customers

Baidu continues it's expanding of sales force in several important districts in the last few qaurters. To meet the ever growing demand, the development of sales and customer service teams is helping Baidu winning potential cusotmers. The number of active customers during the second quarter increased to 128,000, 14.3% higher than last quarter.

Overall, iResearch thinks that, besides the good economic environment surrounding the Chinese internet, the major factors mainly coming from the further improvement inside Baidu. Baidu has better localized strategy for China. Whether on gradually releasing products that fits Chinese users' appetite or on further improve it's sales strategy and sales channel that fits the small and medium Chinese cities, Baidu is well focused.


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