China′s Baidu Posts 31 pct Rise in Q4 Net Profit

Baidu Inc. said Thursday its unaudited net profit in the fourth quarter of 2008 soared 31.3 percent year-on-year to 288.7 million yuan. [Photo: Xinhua]

Baidu Inc., which operates China's most popular Internet search engine, Thursday announced a fourth-quarter net profit increase of 31.3 percent over the same period of 2007, despite a scandal over paid search results.

Unaudited net profit rose to 288.7 million yuan (42.3 million U.S. dollars), or 8.31 yuan per share, the Beijing-based company said in a statement.

Revenue increased 58 percent to 902.1 million yuan (132.2 million U.S. dollars), in line with Baidu's revised estimate for the quarter made in early December, when it forecast revenue of 890 million to 900 million yuan, compared to previously stated 1.025 billion to 1.055 billion yuan.

In a conference call with analysts, Robin Li, Baidu chairman and chief executive officer, said that in the fourth quarter, the "Chinese economy experienced a sudden slowdown and many businesses, including our customers, became more cautious in their marketing spending".

"Also we removed questionable paid search listings form several sectors," he said. "Coming out of this quarter, the quality of our customer base is now higher, and our operational controls are now tighter."

In November, Baidu was embroiled in scandal after China Central Television reported it included websites of unlicensed medical firms in paid search listings for popular medical terms, while excluding certain websites that did not buy keywords.

Baidu had more than 197,000 active online marketing customers in the fourth quarter, up 1.5 percent quarter-to-quarter and 27.1 percent year-on-year.

Fourth-quarter revenue per customer was 4,600 yuan, representing a 24.3-percent year-on-year increase, but a 2.1-percent quarter-to-quarter drop.

The decrease reflected the removal of some customers in the medical and pharmaceutical sector from paid search results, the company said.

Net profit for 2008 jumped 66.6 percent year-on-year to 1 billion yuan (153.6 million U.S. dollars), or 30.19 yuan per share, the statement said.

Revenue for the whole fiscal year soared 83.3 percent to 3.2 billion yuan (468.8 million U.S. dollars).

The company said it forecast slower revenue growth in the first quarter of 2009, as online marketing customers could scale back marketing spending given the market environment.

It also expected the removal of certain sponsored links during the fourth quarter of 2008 would cost around 5 percent of revenue.

Baidu forecast revenue of 780 million to 800 million yuan in the first three months of 2009, up 36 to 39 percent from a year earlier.

But Li said he saw tremendous long-term growth prospects as China's Internet penetration rate has huge room to rise compared with mature markets.

The number of Internet users in China soared to 298 million by the end of 2008 from 210 million a year earlier, driving the Internet penetration rate to 22.6 percent from 16 percent, according to China Internet Network Information Center (CNNIC).

Baidu had a 73.2-percent share of China's web search market, according to the market research firm iResearch.