BEIJING -- Baidu Inc.'s first-quarter earnings more than doubled as it benefited from the conflict between Beijing and Google Inc., as well as improved customer acceptance of its new advertising system.
The Chinese search engine is a key beneficiary of rival Google's weakened position in China after the U.S. giant moved its Chinese search page to Hong Kong following its refusal to continue censoring its Chinese site.
Baidu posted a net profit of 480.5 million yuan ($70.4 million), or 13.77 yuan per American depository share, up from 181.1 million yuan, or 5.22 yuan per ADS, a year earlier, and blowing past analysts expectations for per-share earnings of $1.50.
Baidu's ADS's soared 14.3% to $710.41 in after hours trading, a new high, as the company also projected current-quarter revenue of $268.1 million to $274 million. That compares with the $240 million average of analysts surveyed by Thomson Reuters.
Google last month finally made good on its warnings it would cease operating its self-censored Chinese site and began redirecting Chinese users to its Hong Kong site. Ads from China can still appear on the site, but some advertisers said they have scaled back their spending because they are unsure how long the site would be available to their target audience in mainland China.
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Google's share of Chinese Internet-search market revenue dropped to 30% in the first quarter from 35.6% in the previous quarter, according to estimates by research firm Analysys International. Baidu's share rose sharply to 64% from 58.4%.
Still, Baidu Chief Executive Robin Li downplayed the importance of competition to Baidu's results on Thursday.
"The performance of Baidu is largely driven by our own execution, especially when we already have north of 75% of the total traffic share," he said in a conference call with analysts. "If we can execute well, we will certainly benefit from the growth opportunity of this market, if not there is lots of competition ready to take up (the opportunity)."
Active online-marketing customers grew 20% to 221,000, as revenue per customer climbed 34%. The first quarter represents the first full three-month period with the company's new Phoenix Nest advertising system in operation. The system is more complicated, which raised some initial worries it would alienate advertisers, but the keyword-based system better monetizes search terms.
"Phoenix Nest's performance continued to exceed our expectations as customers increasingly appreciate the new platform's advanced tools and superior return on investment," Mr. Li said.
Revenue jumped 60% to 1.29 billion yuan ($189.6 million), ahead of the company's forecast in February for revenue of $176 million to $181 million.
The company also said it planned to change to a ratio of 10 American depositary shares for every one Class A ordinary share, rather than the previous 1:1 ratio. The change will have the same effect as a 10-for-1 ADS split.
Executives said the ADS split was intended to make share-based compensation more attractive and manageable to employees. "Most employees are like retail investors, they like to hear a greater number of shares," Mr. Li said.
