Baidu shares dip as quarterly revenue slips

Shares in Chinese internet giant Baidu slipped after it reported an unprecedented quarterly drop in revenue following authorities' introduction of new controls on advertising. Revenue in the third quarter came to $2.7 billion (18.25 billion RMB), down a fraction of a percent from the same period the previous year, the company reported in New York, where it is listed. The fall came after the company was embroiled in scandal and lashed by Chinese media over the death of a student whose family used the search engine to seek a cancer cure that did not work. In May, Baidu was summoned by regulators and following a public outcry, the government announced stricter controls on internet advertising, while the company itself stepped up checks on clients. Starting in the third quarter, Baidu began requiring its customers to submit related internet licences and verified enterprise bank account information, Baidu’s chief executive officer Robin Li said during a conference call. "We expect the most pronounced impact on our business in the fourth quarter followed by recovery early next year," Li said. "We remain highly confident in our long-term outlook." The firm said it expects fourth-quarter revenues to drop between 1.7 and 4.6 percent year-on-year. It admitted the customer verification work, which is expected to be finished by year end, will result in loss of customers as they “may be removed from doing business with us” due to the new restrictions. Chief financial officer Jennifer Li said it was "a very special period" and "not time to talk about year-on-year growth yet". "Basically Q4 is what we anticipate to be kind of the bottom,” she added. Although revenues were down, profit for the quarter ending September 30 was up 9.2 percent to $465 million (3.1 billion RMB) year-on-year, according to the earnings report. The rise was driven by the firm slashing marketing and administration costs by 36.9 percent compared to the same period last year. The growing popularity of a Baidu news feed provided a bright spot during the quarter, the release said. The portion of Baidu's revenue coming from mobile device users rose to 64 percent in the quarter, from 54 percent during the same period last year, the company said. Baidu shares were down more than two percent to $171.40 in after-market trades following the earnings figures release.