China's Baidu looks to mobile search for growth

China's top search engine, Baidu, plans to begin monetising its mobile search traffic and social media platforms this year in an effort to boost growth outside its traditional PC domain, Baidu's chief executive said on Friday.

Baidu has expanded its dominant position in China's Internet search market ever since Google decided in 2010 to relocate its search engine to Hong Kong following a standoff with the Chinese government over Internet censorship.

On Thursday, the company reported fourth-quarter earnings slightly ahead of Wall Street's estimates on strong revenue growth, sending its shares up 1% in after-hours trade.

"We do think mobile will become a very important channel to distribute our products and that has increasingly become true over the past quarter. And we think during the coming year, mobile will represent an ever larger%age of our total traffic," Robin Li, chief executive of Baidu told an earnings conference call.

"In the past, we have not spent any resources in monetising the mobile traffic. But starting from this year, we will do something to figure out how to better serve our customers on our mobile platform," Li said.

In December last year, Dell launched a smartphone based on Baidu Yi, a Linux-based mobile platform that links with Baidu's Internet services and will also run Android apps. Li said the firm was hoping to work with more smartphone vendors to expand the use of its mobile platform.

While investors are concerned that a softer Chinese economy would hurt advertising sentiment, Baidu's Chief Financial Officer Jennifer Li said she did not see such a big impact from the macroeconomy.

"We do not read too much into the macro environment," she said, adding that large clients' spending would continue to contribute to the bulk of Baidu's revenue growth.

Baidu said it expects first-quarter revenue of $666.5 million to $688 million. Analysts polled by Thomson Reuters I/B/E/S were looking for revenue of $678.8 million.

"The guidance is in-line, but people think that considering the (economic) environment and the early Chinese new year, maybe the company is giving conservative guidance," said Qi Guo an analyst at ThinkEquity.

Fresh Growth Streams

Other than mobile, Baidu is also pursuing a strategy to monetise its social media platforms and internationalise its business, the chief executive said.

Baidu broke ground earlier this year on a new office building that would house its mobile Internet research centre and its international headquarters.

In the fourth quarter, China's online search market grew 70.2% to 568 billion yuan, according to technology consulting firm iResearch. For 2011, Baidu had a 76.1% share of the market, while Google had 19.8%.

Baidu reported fourth-quarter net income of $326.3 million, or 93 cents per American depositary share. Analysts, on average, were looking for earnings of 91 cents per ADS, according to Thomson Reuters I/B/E/S.

Baidu's revenue came in at $710.9 million, a hair above the average analyst expectation of $708.8 million. At this time last year, Baidu reported revenue of $371.3 million.

With more than half a billion users, China is the world's largest Internet market. Yet, Internet penetration is only at 38.3% and user sophistication outside the big cities remains low.

Baidu has made efforts to expand into mobile, travel and online video sectors to boost growth, and is also amid launching its own browser, Baidu Liuluanqi.

Shares of Baidu have gained more than 17% since the start of the year, but remain off their 52-week high of $165.96.