Baidu's profit flat on growing investments in mobile

The company's research and marketing costs continue to soar

Chinese search giant Baidu's profit was flat in the third quarter because of expenses on marketing its mobile services and investing in research.

Baidu's net profit reached 3.05 billion yuan (US$498 million), up 1.3 percent from 3 billion yuan in same period a year ago. Revenue growth, however, remained strong, increasing by over 42 percent year-on-year to 8.9 billion yuan.

Profit growth for the company will remain flat over the next financial periods, according to Baidu, which is investing more in China's mobile Internet market. The company has long reigned as the country's largest search engine, with a 64 percent share of the market, according to data analytics site CNZZ.com. But the company still faces stiff competition from both traditional search engine providers and social networking products popular on mobile phones.

During the third quarter, the company's selling and administrative expenses soared 115.4 percent year-over-year, largely due to the marketing of its mobile products. Research and development costs were also up, increasing by 77.5 percent.

In addition, the company has been recently making acquisitions. In July, it purchased two app stores in the country for US$1.9 billion. Baidu wants to use the acquisition to become a leading destination for customers to find mobile apps.

In August, the company also bought a majority stake in a top group buying site in China, a move meant to bring growth to Baidu's mobile mapping services.

On Wednesday, Baidu executives called the earnings report strong, pointing to gains made in the company's mobile business, which is showing rising revenue and a growing user base. Baidu's customers in online advertising are still increasing, with the number up by 19 percent from the same period a year ago.

"Our internal tracking shows that we are the clear number one in mobile search," said Baidu CEO Robin Li, in an earnings call. The total installed base for its mobile search app reached over 330 million in the third quarter. This was up 50 percent, quarter-over-quarter.

In the fourth quarter, Baidu projects revenue will range between 9.2 billion yuan and 9.5 billion yuan, marking a 45.5 percent to 49.6 percent year-over-year growth.

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