Chinese internet guru Baidu announced on Friday 30th July 2017 that its net income had risen to hit an 83 percent mark in the second quarter. This signaled a strong recovery from the falling profit margins recorded in 2016, and it is attributed to major cuts in spending.
Baidu’s profit margins were down by two-thirds in 2016 and dropped even further in the wake of 2017. In quarter two, China’s giant search engine pulled itself together and was able to attain a net income of 4.4 billion yuan ($652 million) in the period between April and June 2017. As stated by the company’s unaudited financial results this represented an 82.9% increase.
Analysts had estimated a net income of 2.9 billion yuan, and it is a sign of Baidu’s recovery after authorities issued a crackdown on its primary revenue stream, the online advertising business. Total recorded revenue in the second quarter was 20.9 billion yuan ($3.08 billion), and it represented a 14.3 percent increase from the same period in 2016. Mobile revenue accounted for 72 percent of the total revenue, 62 percent up from the same period in 2016.
“We will execute on two strategic pillars to strengthen our mobile Foundation and lead in AI,” remarked Robin Li Baidu’s billionaire founder and chief executive in his statement.
Cloud storage capabilities and partnerships with car manufacturers like Ford and computing guru Microsoft in creating self-driving cars are some of the major new initiatives taken up by Baidu. Baidu’s search engine dominates the Chinese internet, but the company’s focus is shifting to artificial intelligence as evidenced by the heavy investment it is making in the sector.
Expenses and operating costs have been reduced drastically especially in unprofitable disciplines such as food delivery. This is a move that was aimed at diversifying and distancing the company from an issue that proved to be a thorn in the company the previous year.
Baidu was the target of a social media rage in 2016 following the death of a student who was suffering from cancer. The student’s family used Baidu’s search engine to find a supposed treatment that proved to be ineffective. The incident showed how influential paid advertisements were in Baidu’s search results. In light of the incident, the government promised tougher regulations on online ads.
The move proved to be a blow to the company’s revenue stream compounded by the fact that other tech giants such as Alibaba and Tencent were competing for larger market shares. Alibaba has online sales and an electronic payment platform while Tencent has a ubiquitous social media app WeChat, avenues that made them nearly invincible.
Baidu is a Chinese web service that was incorporated on 18th January 2000, with headquarters at the Baidu campus in Beijing. Baidu has established itself as one of the largest internet companies in the world offering services inclusive of a search engine portfolio for websites, audio files, and images. Among the services offered are 57 search and community services including Baidu Baike and a keyword based discussion forum.