Baidu Inc, operator of China's most popular online search engine, forecast sales growth that beat analysts' estimates.
"We have been gaining traffic share gradually," Baidu Chief Executive Officer Robin Li said in a conference call today to discuss yesterday's second-quarter earnings announcement. The Beijing-based company forecasts third-quarter revenue to rise 77 percent to 2.26 billion yuan ($333 million) as it gained a record number of customers in the previous three months.
Li said he expects to add more advertisers after offering a system that facilitates the sale of online-search keywords in China, the world's biggest online market. Baidu's second-quarter profit more than doubled.
"It's a robust set of results" for Baidu, said Eric Wen, who rates the company's shares "buy" at Mirae Asset Securities Co in Hong Kong. "Baidu's position in the market has strengthened," allowing the company to pay partner websites less to acquire user traffic, which increases profitability, Wen said.
Baidu added 33,000 clients in the second quarter after a nationwide marketing program, Li said. The company has more than 250,000 customers, he said.
Profit for the three months ending June 30 rose to 837.4 million yuan, or 2.40 yuan per American depositary receipt, from 383.3 million yuan, or 1.10 yuan per ADR, a year earlier, Baidu said. That exceeded the 710.4 million yuan average of analysts' estimates compiled by Bloomberg.
Sales rise
Sales in the second quarter were 1.9 billion yuan, compared with 1.1 billion yuan a year earlier, Baidu reported after the close of US markets yesterday.
The average estimate of 13 analysts compiled by Bloomberg is for third-quarter sales of 2.18 billion yuan, compared with 1.28 billion yuan a year earlier.
The adoption of Baidu's Phoenix Nest advertising system boosted the company's sales, CEO Li said. The company switched all customers to the program in December.
Baidu ADRs yesterday rose as much as 4.5 percent in extended US trading following the earnings announcement, after falling 1 percent to $73.31 on the Nasdaq Stock Market.
The stock has gained 78 percent this year, outperforming online rivals in China including Tencent Holdings Ltd, the country's biggest Internet company by market value, and Alibaba.com Ltd, the leading local e-commerce operator. It's also the best performer in the Morgan Stanley Internet Index this year.
Rising share
Baidu accounted for 70.8 percent of China's search-engine market by revenue in the second quarter, rising from 67.8 percent three months earlier, according to research company iResearch. Google's market share dropped to 27.3 percent from 29.5 percent.
Traffic acquisition cost as a percentage of revenue fell to 9.7 percent, compared with 16 percent a year earlier, Baidu said.
China had an estimated 420 million Internet users at the end of June, an increase of 36 million from six months earlier, according to data from the government-sponsored China Internet Network Information Center.
