Baidu's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Baidu, Inc. (BIDU)

Q1 2012 Earnings Call

April 24, 2012 8:00 p.m. EDT

Executives

Victor Tseng – IR Director

Robin Li – Chairman and CEO

Jennifer Li – CFO

Analysts

Dick Wei – JPMorgan

Jiong Shao – Macquarie Securities

Alex Yao – Deutsche Bank

Jin Yoon – Nomura Securities

Alicia Yap – Barclays Capital

Eddie Leung – Merrill Lynch

Catherine Leung – Goldman Sachs

Richard Ji – Morgan Stanley

Wallace Cheung – Credit Suisse

Ravi Sarathy – Citigroup

Gene Munster – Piper Jaffray

Cynthia Meng – Jefferies & Co.

Wendy Huang – Royal Bank of Scotland

Fawne Jiang – Brean Murray Carret & Co.

Presentation

Operator

Hello, and thank you for standing by for Baidu’s first quarter 2012 earnings conference call. (Operator Instructions). Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to hand the meeting over to your host for today’s conference, Victor Tseng, Baidu’s Investor Relations Director.

Victor Tseng

Hello, everyone, and welcome to Baidu’s first quarter 2012 earnings conference call. Baidu’s earnings release was distributed earlier today and you can find a copy on our website as well as on newswire services.

Today you will hear from Robin Li, Baidu’s Chief Executive Officer, and Jennifer Li, Baidu’s Chief Financial Officer. After their prepared remarks, Robin and Jennifer will answer your questions.

Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor Provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC, including our annual report on Form 20-F. Baidu does not undertake any obligation to update any forward-looking statement except as required under applicable law.

Our earnings press release in this call includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com.

As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Baidu’s IR website.

I will now turn the call over to Baidu’s CEO, Robin Li.

Robin Li

Hello, everyone, and welcome to today’s call. We are pleased to begin the year with a strong set of results. As always, our excellent performance was driven by our team’s relentless execution. In particular, we achieved a robust expansion of our SME customer base despite a seasonally slow quarter. We see huge opportunities to develop both our SME and large customer bases. And we have been working hard to capture these opportunities.

Across a variety of [highlight] platforms, our user experience indicator rose strongly this quarter as well. Underpinning this progress in customer base expansion and user experience is our sustained investment in talent, infrastructure and marketing.

In the first quarter, we continued to push forward with our Box Computing initiative. Box Computing embodies our mission for the future of the internet. As part of this, we made good progress on our open data and open application platforms. In March, for example, searches for trending topics and breaking news on Baidu began returning results from all of China’s major (inaudible) platforms.

The market has responded well to our ongoing improvements. As of now, we have tens of thousands of registered developer accounts on the open application platform. These developers have created over 70,000 applications that are available to Baidu users. And traffic patterns demonstrate clearly that users are enjoying the easy access to these apps from our platform.

Since our personalized homepage feature was launched in September of last year, we’ve continued to make it more convenient for users to enjoy. Feedback has been great, and it’s translating into improved user stickiness on the personalized homepage. The daily clicks number has grown very nicely since the launch last September.

Mobile search traffic maintained a strong growth trajectory in Q1. Mobile search is of course central to our overall strategy. Mobile search traffic now accounts for close to one-fifth of the total web search traffic on Baidu. In Q1 we continued to leverage our advanced technology as well as investments in R&D and engineering talent in mobile to make solid improvements here.

As mobile usage has grown, we have started to explore monetization opportunities. For example, we have started to work on mobile Phoenix Nest account management, mobile ad display presentations, and mobile backend monetization technologies. As a result, we’ve seen encouraging progress in CPM for mobile ads. Mobile monetization is still at a very early stage, but we are excited about this tremendous opportunity over the long term.

We’re also very pleased with the reception of Baidu’s iOS and Android apps. These apps not only offer the standard Baidu search experience optimized for mobile devices, but also enable many innovative new features like voice activation for both search and apps.

Box Computing is especially well-suited to mobile users because it brings dynamic, up-to-date information straight to the result page. Mobile users are able to search and access information, content and apps directly from search results. We have also seen a significant uptick in both mobile Post Bar and mobile Knows usage. These are just some of the mobile products that have experienced year-over-year usage growth in the triple digits. Ultimately our focus remains consistent, to ensure that mobile users get the best possible Baidu experience across all devices and operating systems.

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