13 Aug
by Vitaliy Dadalyan
(Bloomberg) — Baidu Inc.’s quarterly revenue shrank 1% and its projections suggest sales could slide again, as rivals like ByteDance Ltd. continue to chip away at its core advertising business.China’s leading search engine forecast sales of 26.3 billion yuan ($3.8 billion) to 28.7 billion yuan for the September quarter, compared with estimates for 27.62 billion yuan. Its shares slipped as much as 8% in extended trading after Netflix-style subsidiary iQiyi Inc. disclosed it was cooperating with a U.S. regulatory inquiry into allegations by Wolfpack Research that it inflated user numbers. Shares in iQiyi fell as much as 19%.Read more: Baidu-Backed Iqiyi Tumbles After Disclosing SEC Probe of RecordsBaidu is riding a gradual post-Covid 19 recovery in its home market but, at the same time, is trying to ward off increasingly aggressive competition in media and advertising from the likes of Tencent Holdings Ltd. and ByteDance. The company is diversifying ad revenue sources and investing in content for its Netflix-style iQiyi Inc. to keep users and marketers from migrating to hotter formats like ByteDance’s news app Toutiao and Douyin, TikTok’s local equivalent. On Thursday, Baidu said it will step up investment in technology and content.“If we look at the budget allocation from advertisers, it looks like Douyin and Toutiao are the most attractive to them starting from about two years ago,” said Raymond Feng, a Shanghai-based analyst with Pacific Epoch. “With the increased investment in Baijiahao, Baidu is trying to catch up on that front, creating more content that’s more welcomed by users, that’s necessary for Baidu to do so.”What Bloomberg Intelligence SaysBaidu’s 2Q online marketing sales could contract less than 1Q’s 19% drop as the company emerges from the worst of China’s coronavirus outbreak. The second quarter has been seasonally strong for advertising in the past, and this time Baidu will benefit from the rebound in offline business activity and improved advertiser sentiment.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.Baidu reported sales of 26.03 billion yuan ($3.75 billion) in the June quarter, versus an average forecast for 25.7 billion yuan. Net income was 3.58 billion yuan, versus the 2 billion yuan projected. Its board also approved an increase of its share-repurchase program to $3 billion from $1 billion, effective through 2022.Once the runaway leader in desktop search, Baidu is trying to adapt its business to the mobile era but losing ground piecemeal to rivals such as ByteDance. To compete, To compete, Baidu’s core mobile search service is morphing into a platform hosting a wide array of content from articles on its Baijiaohao publisher accounts to videos and live-streaming, not unlike Tencent’s super-app WeChat.Longer term, the search giant is investing in artificial intelligence technology, and betting on the commercialization of that through smart speakers and self-driving cars. Revenue from new AI businesses including cloud and smart devices grew by a double-digit percentage in the second quarter, the company said.Rising geopolitical tensions are another source of concern. Baidu’s apps were among dozens of Chinese services targeted in India’s sweeping ban last month, while U.S. entities will soon be blocked from dealing with TikTok and Tencent’s WeChat. The U.S. Congress is moving closer to passing legislation that could effectively bar Chinese companies from trading on U.S. exchanges. Billionaire Baidu founder Robin Li told state media earlier this year that the company is considering relisting in regions including Hong Kong.Chief Financial Officer Herman Yu told analysts on a call that geopolitical tension “doesn’t have a meaningful impact” on Baidu’s business because of its limited overseas exposure.“These positive moves forward, coupled with some temporary setbacks, leave us cautiously optimistic about the business climate into the second half,” Li said. “While COVID-19, geopolitical tension and other phenomenon plaguing the economy may continue to bring about hiccups, the opportunities that AI has presented us are getting more exciting.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
